After the pandemic hit the world in 2020, personal finances are not the same. Many lost their jobs and faced pay cuts during lockdowns. Businesses shut down for good, and things are still far from normal. Right now, you need to plan for a complete money reset. Thankfully, you need not be an expert to manage finances in such challenging times. Here are some simple steps that can help you reset them in 2021 for a smoother time ahead.
1. Set realistic goals for the New Year
Good financial planning is the mainstay of a fresh start with money. But as you set goals and timelines for the next year, keep them realistic.
The pandemic is still here, and things are unpredictable even today. Plan with contingencies in view, think small and play safe with money. Do not expect everything to get back on track because the downturn will be around for the foreseeable future. But realistic goals will help you recover without much effort.
2. Rethink your budget
If you are great with budgeting, now is the time to implement these qualities. If not, now is a great time to learn how to do so!
Rethink your budgets and find ways to save up on monthly expenses. You can cut down grocery bills, give up on unnecessary subscriptions, and even refinance your car to reduce your monthly expenses.
Auto refinancing may sound complex, but it is easier than you imagine. You can check a refinance car loan calculator to find the exact difference the step can make. If it sounds good enough, go for an alternative. You will be a lot more comfortable with a small monthly budget.
3. Automate your savings
Once you have a smaller monthly budget, you can easily save up and build an emergency fund. Automate your savings to a bank account instead of putting the extra money in a piggy bank.
An automated account means you regularly contribute to it like clockwork, and there isn’t a chance you will withdraw and use up the money. You will probably have a comfortable financial cushion for your family a few months later, which helps prevent debt.
If you face unsettled debts, the US government has several options to help find some financial relief. One example is the IRS Fresh Start Program.
4. Prioritize health insurance
If you haven’t taken health insurance seriously, now is the time to take control. The pandemic taught many lessons, and covering up healthcare expenses is one of them.
If you already have a policy, find out if it offers adequate coverage for you and your loved ones. If it doesn’t, you must upgrade it right away. You may have to spend on it, but having insurance gives you peace of mind about the uncertainties ahead.
5. Invest smartly
A financial reset this year should go beyond budgeting and saving. Adults need to get savvy with investments.
Start small and study your options before going ahead. You have plenty of opportunities right now, from stock to cryptocurrencies and real estate. Pick ones you are comfortable with. Even better, diversify your investments to lower the risks and maximize profitability. At the same time, never borrow to invest.
If the web3, an extension of cryptocurrency, is of interest, consider this option, evaluating the pros and cons. Leaders like Darcy Donavan are inspiring women in this area.
Takeaway on finally resetting your finances
The final tip is to manage your debts carefully because they can stress you out. Keep close track of your credit card bills, and stay ahead with timely payments. Follow these steps to make a financial reset for a more secure future.