10 Realistic Financial Resolutions For 2021 Worth Keeping
January 13, 2021
If, as the old saying goes, out with the old and in with the new, then we can’t wait for the calendar to read “January 1, 2021.”
According to a recent study, more than two-thirds of Americans experienced financial setbacks in 2020, either from a job loss or some other emergency expense. However, this same study also revealed that 72 percent of those surveyed believe their financial situation will improve in 2021.
Of course, any such improvement can’t happen without proactive, informed decision-making. That’s why the end of the year is also a perfect time to begin thinking about setting achievable financial goals in 2021. Start by reviewing these 10 New Year’s resolutions for more effectively managing your money.
- Determine your net worth.
Businesses and wealthy individuals aren’t the only ones who can benefit from calculating their net worth. Anyone looking to improve their personal finances would do well to measure the difference between their assets and liabilities.
What are assets and liabilities? Assets include your bank account balances, your retirement savings, and the value of any properties you own, including your home and vehicle. Liabilities are debts: credit card balances, mortgages, car loans, student loans, etc. Your net worth is the amount of money you would have left if you were to liquidate all your assets and pay off all your debts.
Documenting and comparing these numbers may shed light on areas where you’re overcommitted financially and help you optimize your debt reduction efforts in 2021.
- Use a percentage-based budget to build your savings.
Many people think of a budget as the financial equivalent of a diet. Meaning: it’s constraining, unpleasant, easy to cheat on, and often doesn’t deliver the anticipated results. But that analogy misses what is perhaps most important about a budget — the discoveries and insights it provides.
Simply put, you have no idea where your money is going each month without a budget. And that is the knowledge you should have, as it helps you make smart financial decisions.
If creating a budget is something you’ve never done, consider using a percentage-based approach such as the 50/30/20 plan. To implement this plan, allocate 50 percent of your income to essentials, 30 percent to discretionary spending, and 20 percent to savings.
If you can’t currently devote 20 percent of your household income to savings, adjust the formula, and start with a savings percentage that’s realistic for you. Perhaps a 60/30/10 plan might work better, with the goal of building your savings to 20 percent over time. After all, saving something is always better than saving nothing at all.
- Take advantage of technology.
While it’s perfectly all right to go old school and rely on pencil and paper when managing your accounts, you also have plenty of free online budgeting apps from which to choose.
Many of these apps allow you to define budget categories, establish spending limits, and reveal opportunities to rebalance your books and save money.
Moreover, these apps often run both on your desktop (or laptop) computer and mobile devices, meaning you always have ready access to your financial data.
Just be sure to research each app before making a commitment. Not all apps are as fully featured as others, and certain restrictions may apply. (As always, read the fine print). For more information, check out Nerdwallet’s “7 Best Budget Apps for 2021.”
Finally, if you’ve not yet downloaded and installed your bank’s mobile app, resolve to do so in 2021. Using this technology to monitor your bank accounts is a great way to become more comfortable with digital money management tools. You can learn more about the convenient, highly secure features of Guaranty Bank & Trust’s Bank Anywhere mobile app here.
- Eliminate wasteful spending.
How much of your regular spending is absolutely necessary? The best way to answer this question is to take a line item approach to your budget.
If you regularly throw out spoiled food, right-size your supermarket purchases. If you rarely use your gym membership or that monthly music streaming service, cancel both. If you can consolidate your credit card debt and lock in a lower interest rate, consider the pros and cons of doing so. (Another option: transferring all or a portion of a credit card balance to a new card that charges 0 percent interest for an introductory period.)
The savings realized from these cuts may be modest, but they’ll quickly add up. No one looks forward to having to tighten their belt by several notches. The best way to mitigate against that is by being thrifty here and there while you enjoy that luxury.
- Think twice before making impulse purchases.
Impulse buying is a major budget-buster, especially as we’re all spending so much time at home. Boredom can weaken anyone’s resistance to the temptations offered by one-click online shopping.
One way to avoid indulging in this form of retail therapy is to avoid storing credit card information on your phone, tablet, or laptop. Many internet browsers offer to save this information for you and autofill forms that ask for it. Consider turning that feature off and removing any saved credit cards.
Additionally, when the urge to make an impulse buy strikes, remember the 24-hour rule. Before dropping the item in your virtual shopping cart, force yourself to wait 24 hours. In that time, you may come to the realization that you neither want nor need what seemed desirable — or indispensable — the day before.
- Automate your savings.
One way of ensuring that you stick to your savings goals is to automate the process. Doing so is as simple as setting up a recurring automatic transfer of funds from your checking to your savings account. Automating contributions is an excellent way to ensure you’re gradually building your savings, and you may be surprised how quickly your balance grows.
A great way to automate your investment in your future is via a cash round-up account, an innovative solution to linking your checking and savings accounts. Click here to learn how you can save by spending with your Guaranty Bank & Trust debit card.
- Don’t let your money be lazy.
Using interest — money’s own money-earning potential — to your advantage is key to growing your savings. You can do so by opening a money market account or certificate of deposit (CD) that yields higher interest.
Just remember: because money market accounts and CDs are optimized for savings, they typically come with terms and conditions that limit their liquidity. You will still probably want to keep the cash you need for regular expenses in a checking account.
On the other hand, remember that a budget often uncovers facts about your finances you might not otherwise discover. If you have more money than you need to pay your monthly bills in your checking account, you’re missing an opportunity to put those dollars to work for you. Take a portion of those liquid funds and place them in savings.
- Reward yourself with credit cards that offer more than convenience.
Spending can’t be avoided entirely, nor should it be. The key is to spend wisely. But frugality is only part of the equation. When creating your budget, focus on more than how much you spend. Think also about how you spend — which accounts you use regularly and why.
Many credit card companies will reward you for your loyalty by offering additional benefits for using their products. When evaluating credit cards, give special attention to those that offer “points” or other incentives. As long as you keep your account in good standing and avoid incurring monthly interest charges, these points can add up to savings you can use at your discretion.
For example, the Guaranty Bank & Trust Visa Signature® Real Rewards Card gives you the option of redeeming your bonus reward points for cash, travel miles, merchandise, or gift cards.
Consider using a rewards credit card to pay for recurring expenses — that is, costs for which you’ve already put aside funds — such as groceries, utilities, cell phone service, utilities, etc.
- Increase or augment your retirement savings.
Given the current job market, it might not be possible to increase your retirement contributions. However, if you can, plan to save more toward retirement. An increase of 1 percent or 2 percent now can make a substantial difference decades later.
Also, remember that your employer-provided retirement savings account is not your only option. An individual retirement account (IRA) can be an excellent supplement to your existing 401(k) or 403(b). Although your employer may not match your IRA contributions, you may wish to take advantage of the tax benefits these accounts provide.
Contributions to a traditional IRA are tax-deductible — up to a certain limit. Roth IRA contributions are not. However, once a Roth IRA reaches maturity, any money you withdraw from it will not be taxed as income.
In 2021, pledge to think beyond the next 12 months. Doing so will help you enjoy a higher quality of life once your working days are behind you.
- Shop — and bank — local.
Your prosperity is good for your community’s financial health. By the same token, when your community thrives, that usually translates into good jobs, home values that appreciate, and additional opportunities to borrow for life’s big purchases. In short, the money you spend locally creates wealth that, although it may not increase your bank balance, can positively impact the assets that factor into your net worth.
This year, resolve to support your local small businesses by giving them your business. Small businesses are the engine of the American economy. Texas’s more than 2.5 million small businesses employ over 4.5 million people and generate nearly $15 billion in annual revenue.
Additionally, consider investing even more in your friends and neighbors by making Guaranty Bank & Trust your bank. We’re one of the oldest and most respected community banks in the Lone Star State, meaning we’re owned and operated by Texans just like you. We’re dedicated to helping our customers succeed, and we’re constantly growing to meet their needs.
Seeking even more financial advice and support? Talk to one of our friendly and collaborative banking experts today. Just call 888-572-9881 to connect with our Customer Care Center or request a video appointment. We look forward to working together to make 2021 a happier, healthier, and even more prosperous year for all Texans.