2021 Financial Goal Setting Tips
Quarter 1 2021 (January-March)
Create a Budget
A budget is a spending plan based on your income and expenses that helps you save for the future and ensure your bills are paid. There is a variety of budget options out there, such as:
- 50/30/20: Spend 50% of your taxable income on necessities, no more than 30% on your wants, and at least 20% on savings.
- Zero-Sum: Consider what is important to you and choose a “job” for each dollar of your monthly after-tax income.
- Pay Yourself First: Allocate a certain percentage of your income towards savings as soon as you get paid.
Pay Off Your Debt
Having debt makes it difficult for you to save for a house, help your children pay for college, or meet your other long-term financial goals. Focus on paying the debt off so that you can keep more of your hard-earned money in your pocket. Here are some strategies to reduce your debt:
- Debt Snowball: Pay off your smallest debts first and roll the amount you used to pay off the first debts into paying off the larger ones.
- Debt Avalanche: Make minimum payments on all your debts and use the remaining money to pay off the debt with the highest interest rate.
- Debt Consolidation Loan: Combine multiple debts into a single management payment to streamline the payoff process and potentially save on interest.
Quarter 2 2021 (April-June)
Build Your Emergency Fund
An emergency fund prepares you for when unexpected car repairs, medical bills, or other expenses come up. Most experts recommend saving three to six month’s-worth of your regular payments. Keep your emergency fund in high-yield savings account that you can access at any time
Save for Your Retirement
The sooner you begin to save for retirement, compound interest can work to your advantage when you participate in your employer-sponsored retirement plan. If your job does not offer any retirement savings options or are self-employed, consult your financial professional for options appropriate to your situation.
Quarter 3 2021 (July-September)
Earn More Money
Educate Yourself on Personal Finance
When it comes to financial success, knowledge is power. Take the time to educate yourself by meeting with a financial professional, read personal finance articles, or take courses on topics such as saving for retirement, investing, and buying a house.
Quarter 4 2021 (October-December)
Save for a Down Payment
If you see a home in your future, start a down payment fund. While conventional mortgages typically require a down payment of 20%, you may be able to buy a house for much less. This is particularly true if you opt for a government-backed loan like an FHA, VHA, or other loan programs in your area. Remember that the more you have for a down payment, the lower your monthly payments will be and the faster you pay off your house.
Save for Education
In addition, many people graduate from college with astronomical amounts of debt. If you would like to minimize your child’s debt burden, start to save for their college education. A 529 plan, Coverdell Education Savings Account, Roth IRA, CD, or whole life insurance can help you achieve this goal.