New years often encourage personal growth. Not all people choose to establish a resolution, but there are some unavoidable parts of life. One of those aspects is money. Anyone who isn’t going into the New Year with goals to lose weight or hit the gym should make a goal to build financial strength in 2021. After 2020, we have more reason than ever to get a better understanding of finance.
After all, you’re going to have financial commitments in the coming year. We begin with tax season, you will be paying bills throughout the year, and all of your goals have a financial obligation. There’s never a bad time to begin improving your financial knowledge, and 2021 can be a time to commit yourself to build that knowledge.
Building financial strength begins with exposure and a willingness to learn. Once you accept you need to deal with your finances and understand some of the terminology, your goals start to become clearer. Many people actively choose to ignore financial information. Instead, now is your time to actively involve yourself in your finances.
Put Your Stimulus Check to Good Use
Even if you detest New Year’s resolutions, the second stimulus check does greet you at the beginning of 2021. Anyone lucky enough to receive $600 from the government is starting off with an opportunity. This should be a reminder to be responsible, not an opportunity for luxury spending. With this check, your first priority should be getting supplies to survive COVID. If you need more sanitizer, masks, or equipment for your job, then you’d be spending the money well. Your second priority should be paying debts, especially if you have a bill you could not pay for COVID-related reasons.
Beyond those two priorities, you would be wise to save the money. At some point in the year you will run into an unexpected expense, whether it’s medical, repair-related, or a surprise purchase. View this money as your saving grace when this happens. Many companies are going to try to entice you to spend the money on New Year’s sales. Don’t do it! Save the money and use it as a safety net during uncertain times.
Contribute to Your HSA
Medical expenses may be the most frustrating financial burden. You can try to plan for them, but you can never truly anticipate how much you will need to spend. Your Health Savings Account allows you to contribute a portion of your income toward medical expenses. The benefit? It’s pre-tax income. This allows you to pay less in taxes when you do encounter a medical bill.
Let’s say you don’t need to use this money. That’s a great scenario because the money will roll over to next year and you can keep contributing. Eventually, this money can be used in retirement if you truly never need if for medial expenses. Further, this money can be used for anticipated expenses. Copays and glasses can be purchased tax-free if you have HSA contributions accumulated.
Pay Bills in Auto-Mode
One of your financial goals should be freeing yourself from making manual payments. This gives you more time in the long run and prevents the possibility that you’ll miss a payment. Most banks allow you to set up auto payments or send recurring checks. For example, you can have your credit card statement automatically paid so you never need to log in to complete the payment. My bank also sends a recurring check at the end of the month so I can pay my rent without needing to say a word to my landlord.
This still has some implications for your spending, because you need to know you’ve got the funding that allows you make these auto-payments without interruption. Once you get comfortable with your monthly expenses, you can also try to automate more. Check in with human resources at your employer and see which benefits are offered. Some companies will automatically deduct your car and medical insurance from your paychecks, meaning your paycheck will be lower but your bills are paid more easily.
Come Up With a Debt-Repayment Plan
It’s hard to have any financial strength if you have debt. Many young adults have student loans, credit card payments, and a lot of monthly financial commitments. To conquer your debt, you need to balance your monthly output with you debt repayments and identify the areas where you’re spending the most money. By doing this, you can find areas where you can cut back and contribute more to your debt.
Spending your money on debt doesn’t sound glamorous, but you know what sounds pretty good? Financial freedom. If you can cut back spending in one area and put that savings toward your debt you can repay it faster. Once the debt is gone, you can build a stronger financial future without needing to worry about accruing interest and penalties if you miss a payment.
Learn the Basic of Investing
When most people get their first job, they hear teams like “401K,” “retirement plans,” and “employer contribution.” When you’re young, you’re unlikely to have a solid understanding of these terms. As you start to age, it becomes clear that you need some money put aside for the future. This will allow you to retire in a few decades and can turn the dollar you earn today into dollars in the future.
Investing isn’t just for retirement. You can have multiple investments that produce various sources of income. The rewards can be quite exciting, but learning to invest can be a complete snooze. Plus, there are millions of resources out there. This makes it hard to get a firm understanding of your investments because you’re taking impersonal information and applying it to your personal situation. Luckily, you can start small. There are books, YouTube channels, and podcasts on investing. Gradually you will learn the terminology and feel comfortable enough to start taking some action.
Flex Your Financial Strength
Regardless of when you start building financial strength, a lot can change in twelve months. When it comes to money, the changes can be good or bad. With some effort, you can gradually implement small changes to reverse financial damage. This will give you the power to make your money work for you and you’ll have more comfort handling your finances.
2021 starts with many Americans getting a stimulus check. This should be a reminder to prioritize your health and make positive financial choices. While $600 isn’t going to change your life, it’s a great starting point. You can learn to save this money, or erase an error you made with your 2020 spending.
Whenever you choose to get a handle on your money, you will be happy to have the knowledge. This is an investment in the future, and it’s not just a monetary one. Smart people make smart financial choices. Their financial strength guides each decision, and this allows them to navigate their lives toward improvements rather than debt.