The new year is a perfect time to hit reset on our financial goals. Whether you’re becoming more sophisticated in your money management or just starting out, everyone has action steps they can take to shore up their financial picture. Here’s exactly how to meet your 2021 financial goals.
1. Be debt-free
For some of us, this is an enormous goal. But becoming debt-free is a valuable objective to work into your financial plan. Depending on your starting point, this could be a multi-year effort that requires some interim steps and celebrating small milestones along the way.
The first step is an ultra-clear picture of exactly what you owe, at what rates, and by when. Then, assess your personal situation. You may want to consider all of your balances together and start with the highest rate debt you’re paying first. Or, you may consider the snowball method, starting with zeroing out your small outstanding balances to get those good payoff victory endorphins going.
You can also attack debt by “theme” and stretch out that final destination to make your goal feel more realistic, but still clear and actionable. This could look like deciding you want to pay off your student loans five years early, or that you want all retail store credit cards paid off within 18 months. Long-term goals still have steps we can take today, and starting small to tackle debt can make a difference in the long run.
2. Stop impulse purchases
Impulse purchases are really emotions playing out in disguise. To spend with your head and not your emotions this year, start by deleting all of your saved cards in your favorite apps and accounts. That extra step of inputting your card number—even if you know it by heart—gives you another moment to reflect on your purchase.
Also, take some time to establish your big picture financial “why” this year. Why are you hoping to stop splurge spending? Is it that you want to feel more financially secure? Save up to start a family? Bringing your bigger goal to mind often will help you find the motivation to stay on track.
3. Finally make (and stick to) a budget
If you have trouble sticking to a budget, then you just might not have found the right method for you. Instead of wholeheartedly committing yourself to a major budgeting system for the year, commit yourself to some major budget system research.
Take a weekend and pick three different styles of budgeting. For example, set up a spreadsheet, download an app that appeals to you, or dole out some cash into real or virtual “envelopes.” Then, plan a three-month block where you’ll test each one for a month. This is enough time to see if the method resonates through all of your different payments and income sources, but no so long that you get fatigued if it’s not a fit. Remember, the best budget system for you is one you can stick to and where the system feels effortless, even if the discipline takes work.
4. Make peace with money
Resetting your relationship with your finances can look a lot of different ways. For example, if you didn’t grow up talking about money, it can be uncomfortable to plan finances with your partner. As with all things, how we do our finances is how we do life.
What are some of the patterns of behavior you notice in your financial choices? Are they serving your long-term and larger goals? Making peace with money this year may mean that you need to examine the belief systems and historical imprints in your life that have shaped your relationship with finances. Thankfully, shaping a positive money mindset is the subject of countless great books and podcasts that can give you a starting point for self reflection.
5. Get paid what you’re worth
Right alongside your positive money mindset is knowing that you, your time, and your skills are valuable. Even in a challenging economy, you deserve to be paid what you’re worth. Sites like Glassdoor and Salary can help you take a pulse on what the market is paying for your role these days.
Do you know a recruiter? Many of them are happy to have informational conversations around compensation, even if you’re not in the market for a new job. You can also take a look at some of the top skills that employers are looking for. Adding some of these to your professional tool kit can make it open the door to start a salary negotiation.
6. Build emergency savings
If last year taught us anything, it’s that life throws curveballs. While the amount you need in an emergency savings is debatable, the peace of mind that some small savings can bring is not. To start building your emergency savings, take stock of all your spending for a month. What is the bare minimum you would need to get by for 90 days if you and/or your partner lost income?
Work toward that savings goal, knowing that even a bit of a cushion here can be great peace of mind. Higher earners may want to take an even more aggressive stance. High-paying jobs are often harder to source quickly and may take longer to onboard, meaning you’ll want a little more finance back up.
7. Prepare for a major purchase
Low interest rates this year may mean that you’re ready to take the plunge on buying a home, or another major purchase. If so, it’s time to get your finances in order. Savings is just one part of preparing for this big spend.
Review your credit report and understand the picture that a lender would see. Explore pre-qualifying for your loan with your bank or lender. And, have all of your tax documents, financial statements, and perhaps even some reference letters centralized for quick access. Many new home markets are hot right now as people take advantage of remote work. You want to be ready to quickly act when your dream apartment hits the market.
8. Start investing
When it comes to investing, there is a lot to consider around your personal situation. But if you’ve got your savings goals already locked down, take the next step. The first place to plan for is the long-term, future you. What is your retirement savings plan? Understand if you’re appropriately taking advantage of all of your work’s 401(k) matching.
Then, explore if your employer offers other investment advisory offerings, like connecting you with financial planners. If not, a number of investment firms offer reasonable entry points to explore investing beyond your employer-linked retirement products. Just remember that everyone’s situation is completely unique, and that investments can lose value, including the entire original amount you invest. This means you want a crystal clear understanding of your goals and the risks you are taking across these accounts.
9. Create a new income stream
Our financial goals should be tackled as two sides of a coin. Yes, it’s great to reign in and understand spending. But we should also focus on how we can expand and diversify our income streams. Not every hobby needs to be turned into a money-making venture. However, consider how you might start to explore new avenues to make money.
Our virtual world is opening up even more possibilities for this. Could you turn your weekend violin sessions into virtual music lessons? How about starting an Etsy shop with the cross-stitch patterns you started designing during lockdown? Get creative and give yourself permission to think across the full spectrum of your skills, hobbies, and passions.
What are your financial goals this year?
The post 9 Financial Goals to Make This Year—Plus Exactly How to Achieve Them appeared first on The Everygirl.
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