7 Financial Goals for 2021
By: M. Bernard Bloom
Tags: Financial Goals, Investing, Saving Money, 2021, Debt

Photo by Blogging Guide on Unsplash

Year after year in the past, I wrote out my lists of goals and resolutions for the New Year.

In a nod to my age (fifty), I would typically write them down on note cards and then carry that card around in my wallet for the year. It was placed behind the plastic slip that held my photos.

Twenty years or more ago, it was something that provided a fair amount of motivation for me, and, believe it or not, I tried to stick to them even as January and February faded into the past.

Several years ago, I grew weary of writing the same sort of things down year after year while accomplishing so few of them.

But when it came to my financial goals, I was able to achieve quite a few of them. Mind you, some like “make more money” were too vague to say that they were actually accomplished. A two percent raise at work technically qualified, but you and I know that is not what I meant.

But when it came to resolutions like saving certain amounts in my two children’s college accounts or Paying Ourselves First, no matter what, I often did achieve those goals.

Now with December of the most fucked up year behind us, that means it is time to at least contemplate your resolutions for the new year. After a year like 2020, financial resolutions are probably top of mind — after all, you did click on this story on Medium, so you must be right there with me wanting to add a little more lucre to your accounts this year.

Now is a great time to focus on what’s going on with your money. With the right plan in place, you can stick not only to making financial resolutions for the coming year but sticking to them and ending 2021 in a better financial place than you started it.

To help you get started, here are 7 financial resolutions to set, along with a few handy-dandy tips on how to keep them.

1. Refinance your mortgage and/or your student loans

While the coronavirus pandemic has wreaked havoc on many parts of life this past year, it has also provided some fantastic opportunities. For instance, you can now secure record low mortgage rates, making this a prime time to refinance and lower your monthly payments.

I have procrastinated on doing this for so long that it is silly. But instead of being punished for my procrastination, the rates just continue dropping and hovering around record lows.

For a married guy like me, with both my own and my wife’s credit score over 800, there’s not been a better time to refi in a while.

The refi rates today, January 2nd, are pretty great at my bank.

As for student loan refinancing, federal student loans remain in forbearance through the end of this month, meaning interest is suspended, and payments are not required. However, this does not apply to private student loans, and you may want to consider refinancing these types of loans to lock in lower rates.

2. Pay down credit card debt

Consumer credit card debt dropped in 2020 for the first time in eight years.

This came as somewhat of a surprise considering the pandemic-created recession, but it is a hopeful sign that consumers are getting their debts under control.

If you still carry credit card debt, consider making it a priority to pay it off.

There are a few approaches you can take, two common strategies being to pay off your highest debt first (the debt avalanche method) or to pay off your smallest amount of debt first (the debt snowball method).

Source: holbornassets.com

If you are struggling with payments, you may want to consider credit counseling, a low-interest balance transfer, a personal loan, or even a debt settlement.

3. Automate your savings

One of the easiest ways to build your savings is by automating your contributions.

When you automate your savings, you no longer have to think about how much money you want to set aside each month or be tempted to put less into savings.

Most employers allow you to divide your paycheck so that different amounts go into different accounts. If not, you can likely set up automatic transfers with your bank or investment house.

I used this method to build up my children’s college accounts to six figures each on a regular middle-class salary while my wife was a stay-at-home mom. I am not saying that it is easy, but many others have done this before you, and there is no reason why you can’t too.

After committing myself to always Paying Ourselves First with every paycheck collected and mailing checks on my wife’s behalf twice per month, I have finally taken this step and will automatically be investing $500 into my Roth IRA twice per month for the first three months of this year.

My plan is to then decrease the automatic investments to $400 twice per month for the next five, so I will have fully funded my IRA with $7,000 by the end of August.

Regardless of which option you choose, make it a priority to have your savings automated.

4. Start an emergency fund

A Bankrate survey from this past June found that not having enough emergency savings was Americans’ top financial regret since the coronavirus began.

The lesson here is to not overlook your emergency fund.

The new year is as good a time as any to start or grow your emergency fund. In general, experts typically recommend saving three to six months of living expenses.

Start by opening a separate and dedicated high-yield savings account. After that, consider evaluating your spending and look for areas where you can save.

You should set a savings goal, automate your contributions as point #4 recommends, and then try to increase your contributions over time.

5. Invest more

Do not limit your investing to only making tax-advantaged retirement contributions.

If you already have an emergency savings account, you should consider setting up an investment account to invest for goals with specific time horizons, like early retirement or saving for a house. Maybe a second house.

While it is great to max out your tax-advantaged retirement accounts — $6,000 or $7,000 in an IRA and up to $19,500 in a 401(k) — you are going to have even more opportunities if you save in a taxable account as well.

I practice what I preach, as I fully intend to do as I have for the past several years, and continue contributing to what I jokingly refer to as my Transfer Upon Death account in addition to the $7,000 that I will be investing in my IRA.

Some perks of investing outside of your retirement account include there being no limit to what you can save, the ability to defer taxes on unrealized gains (on securities that you do not sell), and immediate access to the funds without penalties if you do have to make use of them.

Although I am still one who prefers to do things myself or to speak with a fellow human, if you are just getting started with making your first investments this year, you may want to consider looking into a Robo-adviser, which will do the investing for you after taking your risk tolerance and ideal earnings into consideration.

6. Cook more meals at home

This may be something you’ve already begun to do with many restaurants around the U.S. being limited to takeout only. Keep it going into 2021.

You can keep it fun (and easy) with meal subscription services, like Blue Apron, which gives you the option of picking new recipes each week along with delivering perfectly measured ingredients straight to your door.

On the other hand, if you’ve turned to takeout as your go-to during this time, then consider giving cooking a try and see how much you save. After giving it a go, calculate your savings and Consider putting those savings toward paying down debt or building up your emergency fund.

7. Seek opportunities to boost your income

Sometimes, it can be less about savings and cutting back and more about finding ways to increase your income.

I am close with quite a few people, including my Younger Brother, who have dramatically increased their income, even during these difficult times.

If 2020 has taught us anything, it is that life is uncertain and having multiple income streams is more important than ever.

Many people are realizing that self-employment is not always riskier than traditional employment because there is built-in income diversification when you have multiple ways to generate income.

There’s a variety of ways you can increase your revenue streams. Freelance work, for example, is great for those who have a specific skill to offer others. But there are also less technical side hustles, like dog walking or selling your stuff on eBay, to consider. Additionally, if you have a more significant amount of capital to front, then you could consider investing in rental properties.

The bottom line is there are plenty of ways to actively or passively increase your income, and it is just a matter of finding what works for you and your situation.

By finding different ways to increase your revenue streams, you are not completely dependent on one income source. Not only can that strategy help you earn more money, increase your savings, and reach your goals, it can also provide some protection if you lose your primary job.

It is also one of the main things one must do to move from a millionaire in the making to one who actually has a net worth of at least seven figures.