After a year like the last, everyone is looking for a fresh and positive start to 2021. For many people, money habits are top of mind, especially with the lessons 2020 taught us. The National Endowment for Financial Education found that 84 percent of Americans said the pandemic caused stress on their financial situation. Establishing permanent, positive financial habits not only can help with retirement years but can also lessen stress as well as create a more confident path to get there.
According to Fidelity, around 66 percent of Americans have high hopes for getting into better financial shape this year. Whether you suffered a serious setback last year or not, quarantine shed light on unnecessary expenses, from premium brands to dining and entertainment. There are ways to continue to adopt good habits and spend less while easing back into normalcy in 2021. Here are four smart money resolutions.
There are likely several habits from quarantine days that can continue to help minimize expenses each month. For example, if you stopped spending six dollars on lattes daily and started making them at home, or if you didn’t visit the dry cleaner but once or twice, continue with these cutbacks this year. Search for bargain brands instead of the premium brands you typically purchase without thinking. A few dollars here and there truly will add up over time. Set a dollar amount as a goal for saving each month and cut all items that are not necessities to achieve it.
Having your contributions automated helps to stay on track with saving and avoid any temptation to spend that emergency fund or monthly retirement savings. Make sure to set up automatic contributions to your 401k at work, your child’s 529 educational savings account, your savings account at your bank, and even a high-yield savings account. Make sure you have an emergency fund, even if your monthly contributions start with 20 dollars, and always pay yourself automatically first.
Debt does not have to be an ongoing way of life. Whether you have loans, tax payments or credit cards hanging over your head, put a plan in place to pay it off. Credit card interest rates can be 18 percent or higher, which makes it harder than to pay down debt. You may be more motivated to make those payments by starting with the largest debt first or by tackling the smaller ones first. It might be an option to transfer a balance to an introductory zero percent interest card for a period of time while you get other debts paid off. Also, avoid opening any new credit cards for the entire year. Focus on paying debt off as quickly as you can.
Your overall plan should include your life goals. It isn’t easy to make smart money choices if you do not have goals in mind. Money is the tool that helps you to achieve those goals you set for yourself. Whether you’re wanting to travel or buy a home or even buy a second home, your plan should be organized by timeframes such as the next five years all the way to retirement. Your short-term goal should be to have a positive balance after you subtract all expenses and savings from your income each month.
This year, more than any other is a chance to take a good look at financial habits and make changes for the better. Financial health leads to improved confidence, happiness, and opportunities. If you need guidance in creating a financial plan that will put you on the right track to retirement, please schedule an appointment on Bayntree’s online calendar by selecting the date and time that is most convenient for you! You can also always reach us by emailing firstname.lastname@example.org.
Bayntree Wealth Advisors provides comprehensive financial planning and wealth management to the east valley of Phoenix and Scottsdale. The Bayntree team specializes in all aspects of your financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.
Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.