As 2020 draws to a close, it’s time to take stock of your finances. Maybe you’d like to start saving for retirement, or you’re hoping to pay off debt. No matter what your financial goals look like, creating a financial plan that works for you is a great way to kick off the new year.
To help you get started, we created a list of four finance tips for beginners. With some organization and prioritization, you’ll be on track for a successful 2021!
#1 – Update Your Goals and Create a Budget
To create a realistic financial strategy, it’s essential to set some goals. After all, saving money feels more purposeful when you have a vacation or new car to look forward to. Think about why you’re reassessing your finances, and consider which expenses are non-negotiable.
To get started on your budget, look at your monthly income, and break expenses into categories. Account for necessities like rent, groceries, and utilities, then take a look at other “unnecessary” monthly costs. From here, you can estimate how much money to allot to each category, and adjust your budget accordingly. Once you have a budget—stick to it!
#2 – Start Saving
You’ve probably heard it before: it’s never too early to start saving. But where do you begin?
Here are some simple saving strategies you can try:
- Save incrementally – Put a little money aside each month. Trust us, when you save incrementally, you’ll be surprised how quickly your savings increase! Set up an automatic transfer through your bank so you don’t need to remember to make the monthly deposit.
- Contribute to your 401k – A great way to start planning for retirement is to contribute to your 401k. If your employer offers to match 401k contributions, take advantage of this benefit and contribute the maximum amount eligible to your account.
- Invest wisely – Think about investing your money in stocks or bonds. With so many investment options on the table, it’s a great idea to work with a broker dealer to find the right investment strategy for you.
#3 – Make a Plan to Pay off Debt
Feeling overwhelmed by debt? You’re not alone. When you have debt from credit cards and student loans piling up, it’s hard to imagine a realistic repayment plan.
Here are a few foolproof strategies to get your debt under control:
- Understand your debt – Organize your debt and make note of interest rates and payment deadlines. This way, you can strategize which debts to tackle first.
- Use an avalanche strategy – When it comes to paying off debt, an avalanche strategy is a great way to tackle payments and feel productive. This entails paying off the debt with the highest interest rate first (which may take a while) so, like an avalanche, your momentum increases as you tackle subsequent loans with smaller interest rates.
- Consolidate student loans – Work with your loan servicer to consolidate student loans. This allows you to combine several federal loans into a single loan. Instead of juggling multiple monthly payments, you’re only responsible for a single payment with a fixed interest rate.
#4 – Establish an Emergency Fund
You never know what life might throw your way. Emergency funds are there for unforeseen expenses like medical bills, necessary car repairs, or sudden unemployment. It’s prudent to have a little cash stored away so you feel financially secure and prepared for anything.
Start small. There’s no need to put financial strain on yourself to contribute to your emergency fund. Make sure it’s in an easily accessible savings account, so you can withdraw money quickly should the need arise.
Prioritize Your Values
At the end of the day, when it comes to money, it’s important to understand your values. Invest in organizations that matter to you, and set aside funds so you can do the things you love.
Remember, it’s never too late to start achieving your financial goals!