2020 was a challenging year for most of us. Many of us experienced job losses, our hours being cut, financial changes and a lot of uncertainty. Thankfully it’s a new year and one of the biggest questions many people are wondering is how to transform their finances in 2021. There are a few simple changes you can make to your life to ensure that your finances improve dramatically without too much sacrifice and stress. Saving money will allow you to pay off debt faster, increase your investments, have extra financial security and maybe even splash out for something special for you or your family. Here are my top tips to improve your finances in 2021:
1.Get Clear About Your Goals
What are your main financial goals for 2021? This is one of the most important steps you’ll take this year around your finances because figuring out what your main financial goals are will allow you to be focused. Are you focusing on building up some savings so you can head off on an overseas trip when borders reopen? Perhaps you’re wanting to make extra repayments on your mortgage, to get it paid off faster and reduce the overall interest paid. Maybe you’re hoping to set up an emergency fund to give yourself extra peace of mind and financial stability? Perhaps you want to do a combination of these goals. Whatever your goals are, being really clear about what they are will help ensure you’re focused and motivated each day to make the changes necessary to achieve them.
2.Track Your Spending
Knowing how much you’re spending on essential expenses such as rent or mortgage repayments, grocery bills, electricity, car repayments, insurance and so on is critical to managing your finances effectively and figuring how much you can save. Ideally you’re going to want to track everything you spend for a month and then figure out what counts as an essential expense, and what is extra spending. There are a number of great apps that help you make it easier to track your spending, but if you want to go back to basics you can just scan through your bank statements and add things up manually.
3.Reduce Mindless Spending
There are ways that many of us spend money without even thinking about it. Do you automatically grab a cup of coffee when you run into the office each day? Perhaps you always buy yourself a few snacks in the gas station when filling up your car. It might not seem like it, but these small, frequent expenses can add up really quickly. I personally love a latte here and there, but found that it became more special when I reduced how often I was buying them. It had become such a habit I didn’t even think about it, but changing my routine so I’m only buying lattes on the weekends, has meant I’m saving around $30 a week. Think about the mindless spending that you do in your daily life that you can easily cut out or reduce.
4.Get Competitive About Saving
If saving isn’t something that you enjoy, or something that doesn’t come naturally to you, why not make it a little competitive? Just like having a workout buddy, having a saving buddy is a great way to make it a fun competition. Set a saving goal with a friend or a group of friends, and have a race to see who reaches it first. Maybe you can even have a ‘prize’ for the winner, like the losers buy them a beer?
5.Make Saving Automatic
Taking the thinking out of saving is a great way to ensure that it happens. Look into what automatic saving options your bank offers. Some banks allow you to move the change from purchases into a saving’s account automatically. Say you spend $5.30, they’ll shift the .70 it would be to make $6 into your savings automatically. It might not seem like a lot, but if you’re making countless transactions each day it can be a wonderful way to boost your savings. You can also set up a more traditional automatic payment to come out of your salary every month. If I automate my savings so I’m not thinking about it, I find it builds up much faster than I expect!
6.Consider Your Credit Card Interest Rates
Sometimes we take out cards or loans, and don’t think much of them until we’ve paid them back. Banks are always offering other options, new cards, better rates and so on. It can be worth checking your credit card rates annually, to see if there’s anything better you might be eligible for. Changing to a credit card that has a lower interest rate can save you hundreds of dollars each year and only takes a few minutes to check.
- Review your Insurance Portfolio
Over time, people’s lives change. However, many people forget to review their various insurance products they own, and make sure they are still matching their financial needs. Says Melissa Thompson of Diabetes Life Solutions ” over time people tend to forget what insurance policies they own. They tend to purchase a policy and set it aside. Insurance products have evolved tremendously, and many people will qualify for better products today, than in previous years. As an example, life insurance for people with diabetes is less expensive today, than in the past. It generally makes sense to re-shop your health, life, and even home and auto insurance from time to time. You never know how much money you can save, until you try”
Hopefully these top tips help you improve your finances. Reaching your saving goals is an important step in moving forward with bigger financial goals. Don’t underestimate how much small changes can make over the course of the year.
