Finish 2020 strong with these six financial stepsMonday 21 December 2020 | Reading Time: 6 minutes
This past year has been difficult for all of us. But with 2021 on the horizon, the holiday season is a great time to strengthen your finances for the New Year. Here are six tips that can help ensure a strong, fresh start for January.
Keep your spending under control
Staying on top of your finances is especially important at the end of the year due to the high costs of the holiday season. Many of us want to spend money on our loved ones, but spending can quickly get out of control if you aren’t aware of what you’re doing and where your money is going. Tracking your finances is a great way to prevent overspending and ensure that you end the year in the black instead of the red. To keep track:
- Save your receipts and keep a running tally of what you’ve bought.
- When you use a credit card, make sure to check your balance so it doesn’t get too high.
- When you finish your holiday shopping make a master list of all your purchases and the costs, so you can be better informed about the amount you spent and can adjust it next year.
Re-strategize your debt payments
To strengthen your finances, it’s a good time to reconsider your payment strategies on loans. If you have a mortgage, refinancing your home loan is something you might explore, especially because mortgage rates are low due to the pandemic. Take the time to shop for better terms. Look to refinance your house at a much lower interest rate.
If you have college debt, consider paying it down more aggressively. If you can refinance your home or consolidate credit card debt, you may be saving a little extra each month from the drop in interest payments. Think about putting that money toward school loans. Getting out of debt is a big goal, but if you can make some money moves and focus on eliminating it, you will save a lot in the long run.
If you have credit cards with high interest consider consolidating your debt on one card with a low-interest rate. Do your homework first. Look to transfer card debt if you can find a credit company that offers deals like 0 percent for 12 months. It will be easier for you to pay down your debt when you have less interest to pay. Paying down your balance will end up saving you a lot of money, especially if you can finish paying your debt off before the 0 percent deal expires.
Review your biggest expenses
Making adjustments to your major expenses is a really good way to strengthen your finances. Expenses like a mortgage, rent, vehicles, and groceries can all be reassessed to try and cut back on the amount you’re spending.
Make a budget for 2021
The end of the year is the time to analyze your 2020 finances and to reevaluate your budget to ensure you aren’t spending beyond your means going into 2021. To make a new budget, determine what your monthly income is, then calculate your current expenses. Your list of expenses should be as detailed as possible. Once you have all of your income and expenses written down, subtract your total expenses from your total income each month. If your balance comes out negative, you may need to cut back on your expenses or make adjustments. Once you have a budget in the black, be sure to look it over at least once a month to make sure everything is on track. Your financial situation can change, especially in these unpredictable times. You’ll want to be prepared to adapt your budget to whatever financial situation may occur.
Create a holiday spending plan
To avoid overspending during the holidays, make a list of who is on your gift list and what your spending limit is per person. This will help you set up a plan for the extra expenses at the end of the year. Although we’re in a pandemic, you may want to factor in travel costs for visiting family members or small gatherings if they are allowed in your area.
Shop around for better insurance rates
If you’re just letting your home or car insurance automatically renew every year, you’re missing out on an opportunity to save money. Try searching for better deals each year by investigating companies, and their policies and offers. You’ll be surprised by how much you can save by acquiring a different agreement.
Consider your life insurance options
If you don’t have life insurance, you should consider getting a policy. While this may seem counter-intuitive to saving money, a life insurance policy is a vital way of ensuring your family’s financial security. It strengthens their financial future. Life insurance can be worked into almost every family budget, and the sooner you apply, the lower your rates will be. The end of the year is a perfect time to apply for life insurance and start 2021 by building security for your loved ones.
Build an emergency fund
To strengthen your finances for 2021, you need to be prepared. The pandemic has demonstrated very clearly that unforeseen events can have a serious impact on our finances. Having a solid emergency fund in place will ensure you don’t face big money setbacks. You should have at least three months salary saved, but aim for six or more. Covid-19 is still happening and it’s been nearly a year, so you can never have too much money put away. If you already have an emergency fund in place, check the status and replenish it if need be, so you can handle whatever surprises might be in store down the road.