The year is almost over – and what a year it was.
You may be ready to step to the curb in 2020, but we still have a few weeks until we can finally say, “I’ll see you, I don’t want to be you” strangest Years each.
And while we wholeheartedly advocate spending most of your time filling ourselves up with sugar cookies and taking advantage of the Hallmark Channel’s vacation deals, we’d like you to take some time to think and plan before heading into 2021 .
Grab a notebook and pen, take an hour or two to enjoy your favorite beverage as we go through these exercises. By following these steps, you will be able to handle anything that comes your way over the next year.
1. Set your financial goals for the coming year
If you think ahead by the end of 2021, what would make you feel like you have been achieved? What if you cut your credit card debt in half? What if you could increase your savings account to four or even five digits? Or build that up Emergency fund Maybe you had to dive into this year?
Think about what you would like to celebrate in late 2021, then set yourself some goals to get there.
We are fans of the SMART method of goal setting. A SMART goal is:
- Specific
- Measurable
- Reachable
- Realistic
- In time
For example, “becoming financially secure” is not considered a SMART goal because it is ambiguous.
On the other hand, “Saving $ 5,000 in my emergency fund by the end of 2021” would be considered SMART because it is specific, measurable, and timely.
Thinking through your financial goals this way will give you more clarity about what you are actually trying to do and it will give you a better sense of how to allocate your resources and energy in the year ahead.
2. Review your spending over the past year (and be honest)
OK, we know this won’t be fun. In fact, it will likely get pretty boring. For this reason, we encourage you to put on your most comfortable clothes, pour your favorite adult drink, and take some time to focus.
Here’s a shortcut: If you use online banking or an app like You need a budget or mintYou will likely have access to graphs that show how much of your income has been used on specific expense categories like food, entertainment, and household expenses.
However, you can still do this without digital tools – it will just take more time and elbow fat. This post offers some great tips too Help with getting started with cost tracking.
Why is that so important? So you know how to actually spend your money. You may think you haven’t got a penny left and that’s why tumbleweeds are rolling in your savings account, but tracking your expenses can reveal another reality that you actually spent a ton of money on. say, scented candles salvaged from the end caps at Target. (Not that we know anyone who does that …)
If you’re struggling to meet your financial goals and can’t figure out why, knowing exactly where your money is going is the first step in order to align your actions with your goals.
Once you have tracked your expenses, you can move on to the next step.
3. Make a budget that works – After all
Look, we know a lot of people don’t care about a budget. We surveyed 1,500 Penny Hoarder readers in April 2019 and found that 40% of them had no budget.
But you really need a budget. This post describes five good reasons You should have a budget in place to help you finally break the paycheck to paycheck cycle and identify where you are overpaying.
If you’ve never set a budget before, read this Step-by-step guide to budgeting for beginners.
We also sketched four of the most popular budgeting styles. Look for one that best suits your needs and personality.
You can try one of these Budgeting Apps We Love, or go old school with pen and paper and set up Bullet Journal, a Budget folder or a Envelope system.
Our motto: If it works for you, then it works.
But what if you’ve tried budgeting in the past and you always seem to blow it? Then now is the time to reconsider your approach. It’s possible that your previous budgets were so unrealistic that if you didn’t live in your parents’ garage and only ate rice and beans, you would never stick to them.
Be honest about what you can and what you need. If that means adding a line item for clearance candles from Target, so be it.
4. Pull out your credit reports and check them for errors
This is another task that should be part of your regular financial maintenance, but many of us either forget about it or we don’t really see the point.
But if you Go through your credit reports With a magnifying glass, you might find:
- Accounts that are not yours. You may have accounts on your credit report that actually belong to someone with a similar name. Karen Smith, are you sure you want Karen Smythe’s overdue Dillards charge card on your credit report?
- Accounts you didn’t recognize were criminal. Perhaps your dental office sent the bill repeatedly to the wrong address, until the unpaid bill went into collections and left a huge black mark on your credit report, and you didn’t realize it until you applied for a car loan or mortgage was declined .
- Outdated or incorrect information about your accounts. Maybe you paid back a loan last year that is still showing up as unpaid, or your credit card balance is way higher than ever. This could seriously affect your credit score, and these three small numbers will have a huge impact on your ability to access credit in the future.
All of these errors can be disputed by contacting the relevant credit bureau. Find out how to do it.
Before you shake this off as something that is unlikely, this is something you should consider Every fifth credit report has a potential error.
5. Make a retirement plan and stick to it
Needless to say, many people haven’t saved up much for retirement. All you have to do is read Dear Penny’s columns to see that.
Why not make 2021 the year you finally take retirement seriously instead of becoming just another statistic? (That goes for you too, millennials – I don’t think we didn’t realize that most of you are now in your thirties.)
We turned the process of retirement planning into one Five step guide This will help you get started.
The first thing you need to do is decide what type of retirement account you want to set up. These accounts offer tax advantages on their contribution so you pay less tax and save for the future – definitely a win-win situation!
If your Employer offers a 401 (k)Make sure you signed up for it. And if your employer offers a 401 (k) match, you’re contributing at least enough to take full advantage of it. After all, this match is part of your compensation. You are entitled to it!
And if you left previous jobs with 401 (k) s, Roll them into your new retirement account. While the process can be annoying, it is worth your time.
If you don’t have access to a 401 (k), options are still available, including IRAs and Roth IRAs. This post has a list of questions You should be asking yourself when trying to decide between them.
Once you’ve set up your retirement account, make sure you do your part regularly. It doesn’t matter if you can only invest $ 25 a month.
6. Celebrate your victories!
We know this post was about how to do better in the future, but we also know that in 2020 you will likely have achieved some things that are worth being too proud of.
Perhaps you’ve managed to juggle your full-time job and help your kids with online classes? Perhaps you lost your job and started a sideline that helped you make ends meet? Maybe you saved some money? Or maybe you’ve started researching personal finance – after all, you’re here, aren’t you?
Take a few minutes to think about what you’ve done in the past year that you are proud of and give yourself some time to really let that sense of pride sink in.
And now, think about that feeling in the coming year, especially when it gets difficult and you face setbacks (because inevitably you will). Trust that if you stick to your plan, you will experience that delicious feeling of contentment again around this time next year.
Caitlin Constantine is a former editor at The Penny Hoarder.
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This article originally appeared on www.thepennyhoarder.com
