Most of us have set new year resolutions this 2021—start exercising, eat healthy foods, travel to other countries, get a new car, and many more. While these are good resolutions to start your year with a blast, you shouldn’t forget about your finances. Times are still uncertain and you should start paying more attention to it. If this pandemic has taught us anything, it’s to prepare for the worse and have a plan B.
When it comes to your finances, it is vital that you get in the habit of setting annual goals. Spend time and think about what you want to focus on in the coming year. If you are unclear where to start, we are here to help. Here are 6 financial goals you should have in 2021:
An emergency fund is extremely important. This should be your first priority when building your finances because it acts as your financial buffer for unexpected events such as accidents, injuries, health problems, and unemployment. An emergency fund can be the difference between being financially prepared and scrambling for funds when the need arises. Life is full of uncertainties and having an emergency fund will help you cushion a huge blow to your finances.
If you want to learn more on how to start and build up an emergency fund, read our previous blog here.
Tracking your expenses helps you stick to your financial goals. Simply knowing where your money goes helps you reveal unnecessary expenses and reduce them. You can start tracking your expenses by downloading a money manager app on your phone.
If you have any debts, now is an excellent time to pay your debts. Interest and late payment fees will hurt you in the long run. However, if you don’t have the capital to pay the total amount, do advance payments and pay on time. Paying on time will help you increase your credit score.
Plan your budget wisely. Plan on how much you should put into your needs, wants, and savings. If your expenses are tilting heavily towards wants, we recommend that you reduce them so more will be allocated to your needs and savings. Have a good budget plan and stick to it.
A good balance for budgeting would look like this:
Learn more about the 50-30-20 budgeting strategy here.
While saving is good, saving money is just half of the battle. As inflation goes higher each year, you need to find ways to boost your income—whether it be finding a side hustle or starting a business. Having multiple sources of income will help you achieve your financial goals faster and mitigates risk because you’re not depending on one income source alone.
Once you have a fully-funded emergency fund and paid all your debts, you can start investing. Determine what’s your risk appetite—whether or not you’re a conservative or aggressive investor. For conservative investors, you may want to invest in fixed income securities or time deposits as it provides good returns while securing your capital. For aggressive investors, you may want to invest in stocks and mutual funds.
Remember you should only invest in what you fully understand. Be wary also of investment scams circulating online.