Ready to make 2021 the best year ever for your finances? Believe it or not, it can be done, even with the economy that we are entering the new year with. Take a few minutes and review 3 simple concepts that you should be putting into effect.
Saving Money For An Emergency
Obviously, you need to save. Before you even consider investing, you need to have an emergency savings account set up with at least 6 months worth of expenses in it. If 2020 has taught us anything, it is that you need a well stocked savings.
If you are entering the year with a depleted savings account or no account at all, the first thing that you need to do in 2021 is rectify this situation. Here is what you need to do.
Open A Savings Account
First and foremost, if you do not already have an account, you should open one. Obviously you need a savings account to save money, but what might not be as obvious is which type of account you should open.
For best results, you should open an online savings account that is separate from the checking account that you usually use. There are two reasons for this.
The first reason is that you need separation between your accounts. You want to be able to get to your savings in an emergency, but you do not want to be able to immediately transfer your funds. This will help to keep you from making any rash decisions that could rob you of your emergency savings.
Second is the fact that online accounts usually pay 10 times more than the one your local bank is offering. Sure, we may be talking about the difference between .1 percent an 1 percent but every dollar counts when you are trying to save money. Why should you leave anything on the table?
Enable Automatic Deposits
Once you have your savings account set up, you need to enable automatic deposits. If you have to manually add money to your savings, you are probably not going to do it, so take the error (you) out of your saving system.
Ideally, you should have your savings deposited on the day that you get paid. Money that you never see will not be missed. You can do this either through your payroll department directly or by setting up automatic transfers with your checking account.
As for the amount to save, it should be 10 percent of your take home pay. This might seem like a lot for some, but it is a crucial amount to build wealth and do it at a decent rate. You do not want to work until you are 80 do you?
Keep making these deposits into your emergency savings until you reach the critical 6 months worth of expenses saved. Then divert the money to an investment account.
Creating A Balanced Budget
Hopefully you have a budget already, but if not, get to it. Nothing too fancy is required, just list out all of your bills. Try to account for every dollar that you spend in a month, including expenses like food, entertainment and fuel.
Once you have this budget in place, you can look for ways to make cuts. If you do not have the room in it to make your 10 percent savings payment, this will be your priority. Lucky for you, this may not be as hard as you think, even if you are spending every dollar you make every month.
Start with the easy to manipulate budget items like food expense. This is super easy to cut by switching to a meal planning system. Simply plan out all of your meals for the week and buy just what you need to make them. This cuts down on food waste and thus saves you money. Also, you should limit dinners and lunches at restaurants.With an average fast food meal costing nearly 10 dollars and a meal at a sit down restaurant costing 20 dollars or more, this can really add up.
Besides food, take a look at your entertainment expenses. Are you going out several times a week? Perhaps you should cut this back and divert more money into your savings account. Look for cheaper ways to entertain yourself such as free concerts in the park or pot luck dinners with friends.
Finally, give every single expense a once over looking for savings. Shop that auto insurance policy, negotiate with creditors for lower interest and refinance loans when advisable. If you still find yourself short of enough money to save, think about looking for a cheaper car or even a more affordable home.
Adding More Income
Everyone wants more money, but few people do anything about it. In 2021, you need to act on it.
What this will mean for most of you is that it will be time to freshen up the resume. It doesn’t matter if you are a white collar worker or a blue collar one, the only way to make more money is to look for a new job. Do you want to see a 10 percent increase in pay versus the 2 percent “cost of living” increase that your employer hands out every year? They save this kind of money for new hires.
If changing jobs is not an option, consider adding another par time job or side business to your schedule. If you are a forty hour a week worker, this is super easy. Just about anyone can find the time to earn more money though. Industries like retail ae always hiring, pay relatively well and have shifts that can fit virtually any schedule.
Should you be completely against an hourly position, maybe a side gig is more your style. This is an opportunity to not only make a little cash but to start your own business, so pick your passion. Is it web design, landscaping or perhaps dog walking. There are dozens of businesses that you can start on the side and add to your income in 2021.