Top New Year’s resolutions that people should make for their finances in 2021 are to follow a realistic budget and pay off existing credit card debt, said Jill Gonzalez, WalletHub analyst.
Oko_SwanOmurphy/Getty Images/iStockphotoIt’s nearly time to bid toodle-oo to 2020 (good riddance!). Soon we will raise a glass to what will hopefully be a much happier, healthier year. And once again, before those champagne bubbles begin to fizzle, many of us will start nailing down goals for the new year.
All things considered, we’re feeling optimistic. An estimated 188.9 million adult Americans (74.02% of the population) say they’re determined to better themselves in 2021, according to a study by Finder.com, a consumer services and shopping comparison site. That’s a 15.17% increase from the previous year.
Behind losing weight and becoming an all-round better person, most see the calendar flip — and lessons learned from the coronavirus — as an opportunity to freshly assess personal finances.
“COVID-19 has forced everyone to consider not only our own mortality but also our financial vulnerabilities – from the stability of our income to the sustainability of our spending habits and savings. So it is no surprise that millions of Americans plan to make financial New Year’s resolutions for 2021,” said Jill Gonzalez, an analyst for the financial services site WalletHub. “There is a clear connection between the financial pressures of the pandemic and Americans’ top financial resolution for 2021: saving more.”
A third of Americans hope to sock more money away in the coming year, according to a survey conducted by WalletHub, but that’s one of several financial resolutions worth considering. To help make financial resolutions a reality, both during the pandemic and in its aftermath, WalletHub offers several tips to help you persevere with that self-promise. Here are a few:
Make a realistic budget and stick to it: The best way to make a budget is to gather your bills from the past few months and make a list of all your recurring expenses. Then rank them in order of importance, with true necessities such as housing, food and health care obviously taking the top spots. After that, you can simply cut from the bottom of your list until your take-home exceeds what you plan to spend. Finally, keep track of your monthly spending throughout the year to make sure you’re abiding by your budget.
Look for a better job: Sometimes, we get so caught up in spending less and saving more that we forget to address the other side of the equation: how much we earn. But the benefits of finding a higher-paying job could actually end up outweighing everything else put together. The COVID-19 pandemic also illustrates how impactful finding the right remote job opportunity can be. Not only does working remotely allow you to save on commuting costs and avoid risking your health, but it also gives you more freedom to choose where you want to live. And moving somewhere with a low cost of living would, in turn, stretch your money a lot further.
Use different credit cards for everyday purchases and debt: The Island Approach involves using different accounts to serve different financial needs, as if they are a chain of islands. The most basic example is using a rewards credit card for everyday purchases and a zero-percent APR card for balances that you’ll carry from month to month. Doing so enables you to get the best possible terms on each card, rather than settling for average terms on a single card. It will also help you reduce the cost of your debt, considering everyday purchases won’t be inflating your average daily balance. And if you ever incur interest on your everyday card, you’ll know you spent too much that month.
Repay 20% of your credit card debt: Americans owe way too much credit card debt: roughly $7,900 per household. Make a plan to pay off 20% of what you owe over the course of 2021. That would amount to about $1,570 for the average household, requiring monthly payments of $131 with a card offering zero percent on balance transfers for at least 12 months. The sooner you can reach freedom from debt, the better off your wallet will be.
Add one month’s pay to your emergency fund: Almost half of Americans do not have a rainy-day fund, according to the Financial Industry Regulatory Authority. Like someone without insurance, people who lack an emergency fund are tempting fate. WalletHub recommends ultimately building a fund with about 12 to 18 months’ take-home income. But it’s important to understand that won’t happen overnight. In other words, you don’t need to put the rest of your financial life on hold until your emergency fund is complete. Rather, chip away at it over time.
Pay bills right after receiving your paycheck: Taking care of monthly obligations before letting yourself indulge in any luxury expenses is a helpful budgeting strategy. Set up two automatic monthly payments from a deposit account: one for right after payday and another for a couple days before your monthly due date. The second payment will help you avoid interest on any purchases made between your first payment and the end of your billing period.
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December 24, 2020 at 07:13PM
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