The year 2021 is upon us! The start of a new year is often the time for new year’s resolutions. As you make them, don’t forget to incorporate your financial goals for the new year as well!
What Are Your Financial Goals for the New Year?
Take the time to think through your financial goals for 2021. Doing so allows you to get your finances in order and set yourself up for a successful year.
No matter what your situation is, financial new year’s resolutions provide you with the ability to have a healthy financial life. You’ll feel good about your financial health in the present and going forward. There’s nothing like feeling (and being) financially secure.
What are the factors underlying financial health? First and foremost, of course, good health is predicated on spending within one’s means. Folks spending more than they make are on precarious financial ground. They’re going into debt, and they’re unlikely to be able to save.
Second, preparation for sudden and unexpected emergencies is highly important, such as a car repair or emergency health care. People should save enough for an emergency fund worth several months of income as a cushion against the unexpected.
It’s also important to have the ability to access information to make informed financial decisions and to have a plan to achieve your future goals.
Set Specific and Realistic Goals
Your financial resolutions for the new year should include defining your goals. Write them down first. Then, go back and prioritize them. Which goal is most important to you? Which one is in second place? Keep going down the list.
It’s simply a fact of human behavior that a vague, ill-defined goal is much less likely to be reached than a solid and defined one. Defining a goal leads to the next step – thinking through what you need to do in 2021 and beyond to achieve it.
For example, instead of a goal such as “I want to build my dream home,” set a goal that will allow you to actually achieve it, such as “I will set aside $550 a month toward a down payment on my dream home.”
Your list of goals can include a wide variety of desires, such as buying a new car, renovating your home, saving for an emergency fund, saving for vacation travel, and more. As long as you set a specific goal, you can make it a reality in 2021!
Make Your Plan
Now that you have your goals, it’s time to make a detailed plan for how you will achieve them.
One important step is keeping a budget of your monthly expenses and income, so you know how much disposable income you have left over to put toward your goals. Keeping a budget also allows you to cut expenses in certain categories if you need to.
Then, figure out how much you can contribute toward each goal. If you want to buy a new car, for example, how much could you put toward its purchase or a car loan? Do that with each goal.
Be aware that you might have to juggle – perhaps slightly less toward a new house so that you can also afford a vacation in 2021, for example. Or, you might want to prioritize the house and do without a vacation until the following year.
Ensure It All Fits in Your Budget AND Lifestyle
After you’ve set up your goals, review them to make sure these goals are realistic for you and your lifestyle. As you look at your budget, is saving more for a home down payment going to mean you can seldom go to a restaurant to eat out? If so, are you comfortable with that?
It’s important to make a plan you can actually stick with. If you set up one in which you only go out to eat once a month or less, for instance, you may eventually feel too deprived to keep with it! Remember, most large-ticket goals, like a home, take more than a year to achieve. It’s important to be realistic about your plans and their timing.
Build in Some Flexibility
It’s also important to build in some flexibility. If 2020 taught us anything, it’s that we need to be prepared for the unexpected. So, first, build in some wiggle room so that if an emergency pops up you can handle it.
Remember, perfection is the enemy of good. If you do get off track, restrain from throwing in the towel. If you need a car repair one month that takes most of your home down payment plan, don’t despair. Just readjust and move forward.
Keep your new year’s resolutions in front of you as the months in 2021 go by! Try not to just put them in a drawer and forget about them.
Keep your plan somewhere you can reference it. Whatever works for you – on a calendar, for example, or on the kitchen refrigerator with a picture. Enlist your significant other for support – especially if these are shared financial goals that impact your lifestyle.
Partner with a Local Bank
Increase your chances of success by partnering with a neighborhood financial institution like CBC Bank. A banking partner can help keep you accountable, on track, and motivated, with offerings like automated transfers, bill pay, and other features to help streamline your financial goals. Interested in building or buying a home next year, for example? Please do not hesitate to come in and talk to us so we can help determine the best path forward for you. Our team is glad to help you work through any questions and help you stick to your financial resolutions.
CBC Bank’s NMLS is 403181