The coronavirus has gutted the US economy. It has resulted in an economic upheaval that left many with job loss or reduced income. Not to mention the havoc COVID-19 has played with global financial markets. Yet, all around us, there are signs of recovery. As we all look to put a tumultuous 2020 behind us, now is the time to get your personal finances back on track. Here are 5 ways to finish the year financially strong, going into the New Year ahead.
1. Budget for holiday spending
Few of us will be taking lavish vacations, visiting family, or spending on lots of presents this pandemic holiday season. But that does not mean all the holiday joy has to be a bust. The experts say the best thing you can do to avoid overspending during the holiday season is to make a list of who you need to buy gifts for. You should also determine what your spending limit is per person. If you go into the holidays with a game plan, you are much less likely to overspend. Overspending on the holidays, especially by maxing out credit cards, is a mistake that could lead to a difficult start to the New Year. This can happen any year, but it can put you in particular dire straits if you are still reeling from COVID related financial issues.
2. Build up your emergency fund
If you are one of the lucky few who has not lost work during the pandemic, now is the time to create and/or build up your emergency fund — in case you are not so lucky as the pandemic drags on, or during the next economic crisis. Most experts recommend keeping at least three to six months of expenses on hand in an accessible liquid account.
3. Review your money goals
As the cooler weather sets in, set aside an afternoon to review your money goals. No matter where you stand when it comes to being personal financially strong, moving your finances in the right direction requires setting thoughtful money goals. As you consider your saving, spending, and investing plans, set goals that are specific, measurable, attainable, realistic, and timely.
4. Revisit your debt
If you have high interest loans, such as credit cards with 17 percent APRs or mortgages with high interest rates, then it might be time to reconsider your repayment strategy. Now is a good time to refinance your home loan since mortgage rates are near record lows. If you are in deep credit card debt, consider taking advantage of temporary debt relief programs. Most credit card companies are offering such programs in light of the pandemic.
5. Revamp your savings plans for 2021
The savings goals that you craft for the year ahead should reflect your values and where you are in life. For example, you might be saving for your next vacation, building an emergency fund, or building maximum savings for your retirement. Each is a worthwhile goal that you can factor into your savings plan.
If you are struggling to become financially strong and meeting your savings goals for 2020, then consider setting up an automatic saving plan. If you’ve decided that you want to save more money in 2021, then an automated deposit into a separate savings account can be the perfect solution. It’s a “set it and forget it” way to build wealth. Even as little as $25 a week swept into a savings account, is $100 a month – or $1200 a year – the same amount as the coveted federal COVID-19 stimulus check!