Maybe you dealt with or are still dealing with a period of unemployment or poor health. Maybe your saving and budgeting priorities have shifted.
If you’re hoping to overhaul your finances, or at least revisit them in the new year, here are some options to consider.
(Re-)Build Your Emergency Fund
Some of us found that we had fewer ways to spend our money during the lockdown this year, while others dipped into or cleared out savings to make up for lost income. Wherever you stand, it’s a good idea to take stock of your savings. The effects of the pandemic are a reminder that it’s never a waste of time to consider how to protect yourself from a financial curveball.
It is best to save at least three months’ worth of expenses in an account you can easily access in case of financial necessity. Your emergency fund can help you pay for basic items like food and utilities during an emergency like job loss, or if you’re on the hook for surprise medical bills.
Set up an automatic transfer now, of as little as Rs.500 or Rs.1000 a month if necessary, to get yourself in the habit of saving.
Make some cuts permanent
In normal times, most of us would spend a shocking amount of our income on restaurants, concerts, and shows. But thanks to the lockdown, we had to stop this in March, and we have surprisingly saved so much! Others have saved money since they are no longer impulse buying at malls they are no longer visiting.
So re-examine your spending. What have you given up in 2020 that you can keep giving up in 2021?
Double Down on Your Retirement Savings
If you lost a job or took a pay cut in 2020, your retirement savings might have been hit particularly hard. If you’re able to now, start investing in a retirement plan or up your savings rate to ensure a comfortable retirement. An ideal aim is to save 15% of your pre-tax income for retirement each year.
Save for the Trip You’ve Been Dreaming Of
For many of us, “travel” in 2020 meant carrying the laptop from the desk to the couch. But the COVID-19 vaccine availability could make travel an option in 2021.
That means it’s a good time to think about how you’ll pay for it, even if you don’t plan to fly until mid-2021 or later. Setting up a separate savings account just for travel or fun stuff can help motivate you to save.
Finally, we hope that, among your resolutions for 2021, you include being good to yourself. That can include setting your resolutions around physical self-care, emotional self-care, spiritual self-care, and financial self-care.
The New Year is coming, whether you like it or not, so you may as well set yourself up for success!
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