It’s difficult to believe it, but the time to set New Year’s resolutions has arrived once again. This year has been unexpected in so many ways, and it’s marked financial struggles for many. Luckily, the beginning of an economic recovery is projected for 2021 — and that doesn’t just have to be on a grander scale. With so much uncertainty heading into the new year, setting money-related resolutions is a smart move. This is especially true if you have a family, or if you’re in the process of starting one.
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With multiple people to care for, financial stability will no doubt bring a sense of relief along with it. If you’re not sure how to get there, these are six family finance moves to make in 2021.
Be More Mindful About Money
One of the first money-related resolutions you need to make in 2021 (or even before then) is to be more mindful about money. Self-awareness surrounding your family’s financial situation will make every other step on this list easier. After all, if you don’t fully understand your own situation, how can you improve it?
Go through your finances (with your partner if you have one) and see how much you’re spending each month — and on what. From there, determine what you can cut. Do you have unnecessary subscriptions that pile up every month? What about credit card or utility bills that can be negotiated down? Use a mindful spending worksheet to help you go through bills and answer these questions.
Reflecting on how much you’ve spent recently and where you can change is a step in the right direction financially. Once you understand your spending habits, you can start changing them. That’s what resolutions are all about!
Build an Emergency Savings
If 2020 has taught us anything at all, it’s to expect the unexpected. With any luck, 2021 won’t rock the boat nearly as much as this year has. Still, having emergency savings is a critical step toward financial security. This is something everyone should have in case of unforeseen happens. Unfortunately, it can be difficult to take steps to set aside money every paycheck. Many feel that they wouldn’t be able to put enough toward savings to even justify it.
Regardless of how much you can contribute to your emergency savings each month, you should add to it regularly. Even small amounts add up eventually. And having emergency savings is the only way to break a cycle of debt every time something unexpected comes up.
Choose an amount that works for your budget and commit to putting that into your emergency savings every month. Additionally, set a goal for how much you’d like in the fund before shifting focus to other savings and investments.
Make a Plan to Pay Off Debt
Saving for emergencies or other big life events is an important money-related resolution to make. However, it can be difficult to contribute a significant amount to savings if you’re facing debt. Whether it’s credit card bills, student loans or a mortgage, make a plan to tackle any debt you have. It’s not necessary to pay it off completely this year, just making strides toward doing so is enough.
If you have a partner, sit down before the new year and address the best way for you to handle debt. If you can afford to start paying above the minimum on certain bills, that’s a great start. You’ll also want to determine whether you plan to tackle the highest interest payments first. Or would you prefer to eliminate smaller bills and work your way up?
This credit and debt management worksheet can help you make changes to your debt situation. Addressing where you are and determining where you want to be is the first step toward freedom.
Set a Budget & Track Your Spending
Saving money and tackling debt is made easier by having a budget. Far too many people think they’re spending a reasonable amount from paycheck to paycheck. In reality, however, many aren’t tracking the purchases they’re making. And those lattes and small impulse buys sure can add up!
There are so many ways to track finances these days, from spreadsheets to apps like YNAB. Speak to your partner or a loved one and figure out which method works best for your family. Once you’re forced to write down what you’re spending, you might just see that number decrease. Telling others about your budgeting goals can also help keep you accountable.
This budgeting worksheet can help your family set and stick to budgeting goals.
Work on Your Credit Score
As you begin budgeting and working your way out of debt, you’ll want to improve your credit score. A good credit score can open so many doors for your family, but it can be difficult to maintain. In line with your financial mindfulness, make note of your current score. Then determine where you’d like it to be.
Once you have a goal, you should figure out where you can improve your score. Are you not paying your bills on time every month? Set up automatic payments or schedule reminders in your phone. Are there marks on your score you need to dispute? Make sure to do that; it’ll be well worth the efforts if it helps improve your number!
Set Long-Term Goals
Although your family may not be in a place to tackle long-term goals just yet, knowing where you’re headed will help you stick to the short-term ones. Whether you’re saving for a home, looking to invest or something else entirely, picture where you’d like to be financially beyond 2021. Knowing this will give you something to look forward to and focus on when your money-related resolutions become hard to keep.
You’re more likely to stick to your goals when you remember the reason for having them. And your long-term goals to improve your family life definitely qualifies as a good motivator. Keep envisioning the future you want for yourself and your loved ones!