A new year is a time for people to reflect on new resolutions and changes they want to make, and finances are no exception. Nearly 97 million Americans have plans to make a resolution in the year 2021, according to a recent survey by WalletHub. Many people choose to attempt financial resolutions to change their financial future for the better and establish better habits when it comes to money.
As 2021 begins, consider establishing a few financial resolutions of your own to help improve the way your money can work for you in the new year. Here are a few of the most popular financial resolutions people often make at the start of a new calendar year.
Getting Out Of Debt
One of the most common financial resolutions is to start paying down or eliminate completely any outstanding debts. These debts can be anything from high-interest credit card debt to student loan debt, but reducing them can make a big difference to your overall financial health. With less debt, you’ll free up more money to go toward savings and retirement— and you’ll also simply feel less stressed about your finances.
Some easy ways to start paying down outstanding debt can include taking on a side job to make extra money, cutting back on your spending, reducing your credit card use, and directing money toward an emergency fund. Though it might not seem like putting money in an emergency fund can help pay down debt, having one available can help you avoid using credit cards to cover any emergency situations or other unplanned expenses.
Find the Right Job
A lot of people search tirelessly for ways to save money, reduce debt, and improve their budgets, but few consider the overlooked second half of improving your finances: your job. Especially during this past year in dealing with the coronavirus pandemic, it has become clear that having the right job with the right pay and benefits is vitally important. Jobs that allow for remote work have been extremely important as businesses shut down offices and in-person work, but remote work has benefits beyond those seen during the pandemic.
If you have a job that allows you to work remotely, you can save significantly on commuting costs and even potentially move to a new area with a lower cost of living. Maybe this year should be the one you start looking for a better paying job with more benefits.
Getting a new job is not completely within your control, of course—but it never hurts to start looking and asking yourself what you can do to position yourself for a better career. For example, do some research to see if getting a certification or taking a few low-cost classes (for example, at a community college) could set you on the right path to a higher-paying job.
If you haven’t already begun saving for retirement, now is the time. Retirement planning is essential to ensure your financial future, and the earlier you start saving, the greater your returns. Check into the retirement options from your employer. If you have access to a 401(k) plan that provides matching contributions, do what you can to contribute the maximum amount your employer will match. Employer matching allows you to add additional money to your retirement for free. Another smart strategy is to increase your 401(k) contribution with every raise you receive, to be sure you are getting the most out of your paycheck.
Increase Your Savings
New Year’s resolutions that focus on finance are frequently focused on saving. WalletHub notes that the top financial resolution for 2021 is to save more. To get started on a savings goal in the new year, you might try a temporary spending freeze or other smaller types of savings challenges. Even a small increase in your savings—say $10 per week—can start you on the right path to improving your financial health. The coronavirus pandemic has shown that a savings cushion is extremely important in successfully navigating emergencies and other unexpected financial situations. If you have not already started building up an emergency fund, now is the time.
Create a Realistic Budget, and Stick with It
Many people struggle to stay within their established budge because it’s not realistic for their needs. The new year is a great time to reassess your current budget and ensure that it accurately reflects your income, needs, and wants. Make sure that your spending limits work for you. Sometimes, people get overzealous and create a budget that is extremely restrictive in an attempt to save money. However, this can backfire and encourage more overspending—leading you to become frustrated and give up the budget altogether, in exasperation. Always remember that good budgets allow for spending in “fun” categories like entertainment, while prioritizing basic needs.
The Bottom Line: Ensure Your Financial Future
As we head into the new year, consider focusing your resolutions on improving your financial health to ensure a secure and prosperous future. Though some things are out of your control—like the movements of the larger economy—there’s almost always something you can do to improve your spending, saving, investing, or earning.