There’s a good chance you’re one of the 97 million Americans that set a New Year’s resolution for 2021. And after a year that was financially challenging for so many, correcting course and setting a financial strategy for the year ahead is as important as ever.
A recent Credit Karma/Qualtrics survey showed that more than two-thirds of Americans picked up new financial habits as a result of the pandemic and 94% plan on sticking with those strategies as they begin their 2021 financial planning. Financial strategies will vary from person to person based on goals, but these key areas will help you build your savings in 2021:
Your budget is your roadmap.
The pandemic tossed many budgets out the window as millions of people went into survival mode. Now is a good time to get back on track and revisit your pre-pandemic budget and financial goals. This will help you start 2021 with a clear vision of where you will be spending your money and what savings benchmarks are realistic and achievable in 2021.
Your budget can help you stay on track to reach your goals and ensure you are reducing unnecessary spending, paying bills and building your savings.
Here are a few items you may want to add to your budget for 2021 that weren’t always necessary to consider in previous years:
- Sanitizing/cleaning supplies and services
- Personal protective equipment
- Over the counter medication
- Medical fees
- Upgraded WIFI or new technology (for virtual learning and working from home)
- New hobbies discovered during quarantine
- At-home fitness equipment (eBay’s online sales of fitness equipment increased 20 times due to the pandemic)
- Therapy and emotional support
Spending less = saving more.
Cutting spending doesn’t mean you have to surrender all the things you love. But it does mean taking a close look at your spending patterns to determine which expenses are no longer necessary. The pandemic changed purchasing behaviors for many. For example, 28% of survey respondents subscribed to at least one additional streaming service during the pandemic. However, as we move into 2021 with hopes of being able to move beyond the walls of our homes, you might want to audit the various streaming services you subscribe to and narrow down which ones you’ll need in 2021.
The pandemic also forced many to cut spending because they did not have money coming in. It’s time to revisit those cuts you implemented in 2020 and determine which should be carried through to 2021, and what new cuts or adjustments should be considered to help reduce spending.
All aboard the savings train.
Since the pandemic began, 14% of Americans wiped out their emergency savings. That’s 46 million people who no longer have a cushion to fall back on when the unexpected happens. And just like fitness goals, it always feels like it takes a lot of hard work to get the savings train heading in the right direction, but takes no time at all for it to derail.
Even if it’s done in smaller-than-hoped-for increments, starting to save with baby steps this month puts you in the right mindset for the rest of the year and can help you establish healthy financial habits for the year ahead.
Having a goal to work toward is important, even if it’s as simple as replenishing that emergency savings you drained last year. Or if you’re looking for a more substantial goal, try turning your savings journey into a fun year-long challenge the whole family can get involved in. Try the 52-week challenge in which you save $1 on week one, $2 on week two and so on until you’re saving $52 on week 52. Succeeding in this gradual savings plan would save you $1,378 this year.
Check in with your credit score.
Financial struggles caused by the pandemic forced many people to put more money on credit cards than they normally would have and some missed important payments altogether, which can damage your credit score. Now is a good time to get a pulse on where your credit score sits, how the last 10 months have impacted it and what steps you should take now to boost your score. Read up on tips for improving your credit score and common credit score myths as you define your credit score goals.
Kicking off a savings plan can be difficult in the best of circumstances. If you need help getting started, schedule a time to meet with one of our team members virtually or in person.