2021 is almost here, and that can only mean one thing: it’s time to set your New Year’s resolutions.
But before you get started, we’d like to make a few suggestions. We’ll be specific and focus on one of the most important areas of your life: your financial health.
Here are 5 Personal Finance New Year’s Resolutions for 2021:
Pay Off (Part Of) Your Credit Card Debt
Debt is a part of life, especially if you own a credit card. According to NPR, Americans owe nearly $1 trillion in total credit card debt. As a result, overdue payments are on the rise.
2020 has exacerbated these longstanding challenges.
When it comes to eliminating your own debt, it’s best to start small. Rather than overwhelming yourself with a broad resolution to “pay off all your debts,” set a clear and specific target.
For example, make a plan to pay off 30% of what you owe over the coming year.
What would that strategy look like in practical terms? According to The Street, average household credit card debt is about $5,331.
Since 30% of that total debt equals about $1,600, you would then need to pay $133 per month to achieve your goal.
To consistently save that $133 each month, you need to have a budget.
Build a Winning Budget
As financial coach Dave Ramsey describes, “a budget is telling your money where to go instead of wondering where it went.”
If the word “budget” strikes fear in your heart, you’re not alone. According to CNN Money, only 41% of Americans actually use a budget.
The good news is, there’s never been an easier time to get started.
Because we live in the exciting age of financial technology (aka fintech), convenient new apps can help you stay on track.
According to Howard Dvorkin, Chairman of debt.com, “The days of budgeting tools being defined as a pencil, eraser, and yellow notepad are long gone. Now young people can budget in real time on an app.”
Here are two of the most popular budgeting apps on the market:
- Mint: One of the best-rated budgeting apps, Mint categorizes all of your credit and debit card transactions against your set budget. You’ll regularly receive a full breakdown of your spending by category and receive notifications whenever you exceed your limits. Click here to learn more and download the app!
- PocketGuard: In addition to tracking your spending (and monitoring your budget), PocketGuard goes a step further. By looking at your recurring bills (like phone, internet, and subscription services), PocketGuard actively searches for better deals to help lower your monthly costs. Click here to learn more and download the app!
Both of these apps are free.
Better yet, as you set and stick to your budget, you create a new opportunity for financial health: growing your emergency fund.
Establish (Or Expand) Your Emergency Fund
The pandemic revealed the importance of having an emergency fund.
It also showed how many Americans aren’t prepared for an economic downturn. According to MarketWatch, 38% of Americans do not have access to $500 in cash without selling prized possessions or taking out a loan.
Avoid being part of that statistic, and start building your emergency fund.
Experts recommend having enough money to cover at least 3 to 6 months of living expenses. While a traditional emergency fund includes essential costs like housing, food, and healthcare, less frequent expenses like entertainment or vacations are exempt.
To get started, simply identify the bare minimum of what you need to stay afloat per month, and build from there. And while an emergency fund takes time to grow, know that you are steadily securing your future with every dollar you set aside.
Invest Your Income
Diversified income fuels financial freedom. One of the best ways to find new streams of cash flow is to invest and grow your money.
Thanks to the ingenuity of fintech, investing has never been easier. Here are two of the most accessible apps to begin your journey into the stock market:
- Acorns: Intuitive and fun to use, Acorns helps you get automatic investing with none of the stress.
Here’s how it works: start by linking a credit or debit card to your account. Acorn will then take the spare change from your purchases, round up to the next dollar, and invest the money on your behalf.
With portfolios developed by Nobel Prize-winning economist Dr. Harry Markowitz, Acorns charges just $1 a month to start growing your investments. Click here to learn more and download the app!
- Robinhood: Ready to invest but want to avoid steep trading commissions and fees? Robinhood lets you trade stocks, ETFs (exchange-traded funds), and cryptocurrency for free. Though more hands-on than Acorn, Robinhood is designed to make investing fun and rewarding.
While enabling you to invest in thousands of stocks with as little as $1, Robinhood helps you trade in real time and build balanced and diversified portfolios.
Click here to learn more and download the app!
Promote Your Physical Health
There’s a growing link between fiscal and physical fitness.
According to a recent study by the American Heart Association, people who exercise regularly pay $2,500 less in healthcare costs than those who don’t.
Those who focus on losing weight also stand to save thousands of dollars.
In fact, the Johns Hopkins Bloomberg School of Public Health found that young adults who lose weight save an average of almost $18,000 over their lifetimes. Similarly, a middle-aged adult with significant weight loss could save up to $31,447 in lifetime medical costs.
As the study revealed, poor physical health raises medical and societal costs while lowering productivity. Drawn out over many years, poor physical condition can cost tens of thousands of dollars.
Carol Craigie, Chartered Financial Consultant (ChFC), asserts her belief that working out and budgeting share similar principles:
“If you limit your calories but it’s all chocolate and ice cream, then you’re not going to be healthy,” Craigie says. “And if you limit your spending but it’s all on stuff and not saving for the future, you’re not going to be (financially) healthy.”
In 2021, embrace your physical health to advance your financial wellness.
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