5 Realistic Money Resolutions That’ll Set You Up for Success in 2021

As we step into 2021, making resolutions is a tradition that many of us uphold. Among these resolutions, financial goals are often at the forefront. Whether you aim to save more, spend less, or invest wisely, setting realistic money resolutions can pave the way for financial success. Here are five achievable money resolutions that will help you thrive in 2021.

1. Create a Budget and Stick to It

Budgeting is the cornerstone of financial health. By creating a detailed budget, you can track your income and expenses, ensuring that you live within your means. Start by listing your monthly income and categorizing your expenses. Allocate funds for essentials such as rent, utilities, groceries, and savings. Use budgeting apps like Mint or YNAB (You Need a Budget) to simplify the process. Consistently sticking to your budget can help you avoid debt and save for future goals.

2. Build an Emergency Fund

An emergency fund acts as a financial safety net, protecting you from unexpected expenses such as medical bills, car repairs, or job loss. Aim to save at least three to six months’ worth of living expenses in a high-yield savings account. Start small by setting aside a specific amount each month and gradually increase it. Having an emergency fund can provide peace of mind and financial stability during uncertain times.

3. Pay Down Debt

High-interest debt, such as credit card balances, can hinder your financial progress. Make it a priority to pay down debt in 2021. Begin by listing all your debts and their interest rates. Focus on paying off high-interest debt first while making minimum payments on others. Consider using the avalanche method (paying off debts with the highest interest rates first) or the snowball method (paying off the smallest debts first) to stay motivated. Reducing debt can improve your credit score and free up more money for savings and investments.

4. Invest in Your Future

Investing is a powerful way to grow your wealth over time. If you’re new to investing, start by educating yourself on the basics. Consider opening a retirement account such as a 401(k) or an IRA and contribute regularly. Diversify your portfolio by investing in a mix of stocks, bonds, and mutual funds. Use robo-advisors or consult with a financial advisor to create a personalized investment plan. Consistent investing can help you build a robust financial future.

5. Improve Your Financial Literacy

Financial literacy is key to making informed decisions about your money. Dedicate time to learning about personal finance topics such as budgeting, saving, investing, and credit management. Read books, follow finance blogs, listen to podcasts, and take online courses to expand your knowledge. The more you know, the better equipped you’ll be to make smart financial choices and achieve your money goals.

FAQ

1. How do I start budgeting if I’ve never done it before?

Begin by tracking your income and expenses for a month to understand your spending habits. Use this information to create a budget that allocates funds for essentials, savings, and discretionary spending. Utilize budgeting tools and apps to make the process easier.

2. How much should I set aside for an emergency fund?

Aim to save three to six months’ worth of living expenses. Start with a smaller goal and gradually increase your savings. Keep the funds in a high-yield savings account for easy access.

3. Which debt repayment method is better: avalanche or snowball?

Both methods are effective, but it depends on your preference. The avalanche method saves more on interest by targeting high-interest debt first, while the snowball method provides quick wins by paying off small debts first, which can boost motivation.

4. How do I start investing with little money?

Start with small contributions to a retirement account or investment platform that allows low minimum deposits. Consider using robo-advisors, which can help you invest with minimal amounts and provide automated portfolio management.

5. What resources can help me improve my financial literacy?

There are numerous resources available, such as personal finance books, blogs, podcasts, and online courses. Some popular books include “Rich Dad Poor Dad” by Robert Kiyosaki and “The Total Money Makeover” by Dave Ramsey. Websites like Investopedia and NerdWallet offer valuable information and tools.