What was the top New Year’s resolution in 2020? A researcher using artificial intelligence combined four years of answers from nearly 275,000 Americans to come up with the top resolution: “Actually doing my New Year’s resolution!”
While the COVID-19 situation will change how many people celebrate the new year, it won’t change the need to plan for a financially sound 2021. One way to keep your planning simple is by following the top three resolutions in the top three financial categories.
Manage What You Have
Create a budget
Start the year by tracking your spending during January, and then creating a budget. Aim for the 50-30-20 rule: 50% for needs, 30% for wants, and 20% for savings.
Cut unnecessary spending
Check your spending on memberships and recurring payments for services you might not be using, such as a gym membership or streaming entertainment services. A few clicks or a call will put money back into your budget.
Pay more than the minimum
Resolve to pay more than the monthly minimum on your credit card accounts, or commit to making a double payment a few times a year.
Plan for the Unexpected
Add to your emergency fund
You should aim for six months’ of savings to help you get through a period of unemployment or other emergency. Treat your savings like a bill, and commit to “paying” into savings every month.
Save for big-ticket items
At some point, appliances break down, roofs need to be replaced, or the kids need braces. Just as you save for emergencies, put away funds regularly toward higher-priced replacement items.
Check your available credit
When the unexpected occurs, you’ll want to make sure you have a way to pay for it, so check your credit limits and see if it’s time to apply for a new “emergency” card. Bonus: If the card earns rewards, you can treat yourself for your good saving habits.
Prepare for the Future
Save for retirement
There are no loans or credit cards to finance retirement, so prioritize saving money in a retirement account. If your workplace matches 401(k) donations, that’s free money for the taking.
Check your insurance policies
If you have a family or plan to start one, then protection with an array of insurance policies is a smart idea. In addition to property and health insurance, you might find life and disability policies provide solid protection for your future.
Get out of debt
As you plan for the future, work to pay off all your debt so your retirement funds work for you, earning interest or dividends to support your new lifestyle.
Finally, resolve in the New Year to check your credit report regularly through one of the websites that makes the report available at no cost, and immediately correct any errors. A solid credit score is the foundation for access to reasonable credit, and one of the best financial gifts you can give yourself for the New Year.