Monday, 25 January 2021

Millions of Americans had their finances upended by the COVID-19 pandemic in 2020, whether due to job loss, reduction of hours or drastic lifestyle changes.

If you were one of the millions who experienced economic stress in 2020, the beginning of a new year can be the perfect time to take steps to regain control of your money and position yourself to move forward financially. Here are six suggestions:

1. Stick with your pandemic budget spending habits

Chances are, your spending habits changed significantly in 2020. You probably spent much less on dining and entertainment. If you worked from home, your commuting costs likely plummeted. Perhaps you found an alternative fitness routine when your gym was closed.

Even though we all hope life will return to normal in 2021, why not factor your new spending habits into your 2021 budget planning? By making these reductions permanent—no costly gym membership, fewer restaurant meals— you could free up money to pay down debt or boost your savings.

2. Rebuild your emergency fund

Many Americans were forced to dip into their emergency savings during the economic crisis caused by the pandemic. If you were one of them, you understand the value of a rainy-day fund and probably want to focus on rebuilding yours in 2021.

Why not make 2021 the year you live with less? Again, you were probably forced to cut spending and do without many things during the pandemic. Continuing this trend — and actively working to find additional ways to save — could help you get back on your feet faster. Think about it: could you live without cable, get a cheaper cell phone plan or nix subscriptions you rarely use? Even eliminating minor expenses can add up and help you rebound, rebuild and regain your financial confidence.

3. Get professional help

Many people think financial consultants are just for wealthy people. Not so. Financial consultants also specialize in helping people build wealth instead of just helping them manage it. Even if you only meet with an advisor a few times, he or she could help you create a plan to spend less, save more, pay off debt and start investing.

4. Get serious about retirement

If 2020 taught us anything, it was that saving money is beyond important. Because savings — any kind of savings — can be crucial to surviving uncertain economic times.

That said, if you aren't saving for retirement, make 2021 the year you commit to start. If you have started, resolve to contribute as much as you can — particularly if your employer matches any of contributions (this is basically free money). Not sure how much you'll need to retire? Check out our retirement calculator.

5. Reset your investments

The stock market took a hit in the spring of 2020 as the pandemic shut down much of the U.S. economy. It has since rebounded; however, there are certainly some stocks that have not recovered from impact of the pandemic.

If you currently have money in the stock market —whether through direct share holdings or through mutual funds — it makes sense to review your investments to see if you need to make adjustments in response to the volatility of the past year.

This includes your retirement savings. Many people tend to leave their employer-sponsored retirement savings alone. However, most of these plans let you decide how your money is invested. Making sure your money properly allocated can make a big difference down the road.

6. Prepare for future uncertainty

Another valuable lesson from 2020 is that we need to be prepared for anything. That means taking steps to protect ourselves emotionally, physically and financially.

One of the most important financial steps you can take is to build your savings. Also, reviewing your insurance coverage — medical, property and life — can provide additional protection and peace of mind. And don't neglect longer-term financial issues such as creating a will and organizing essential documents.

If you're like most Americans, you were more than ready to say goodbye to 2020. As you kick off 2021, making some financial adjustments and commitments can help you minimize the impact of 2020, regain your financial footing and prepare for what will surely be a brighter new year. 

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