It was a tough year, and many took a hit financially. If nothing else, this year taught us that preparing for the unexpected can be a crucial part of any financial plan. It’s certainly safe to say 2020 was unexpected, but we’ve persevered and are now headed into 2021 with hope—and a plan. A financial plan. Use these tips to help get your year started on the right foot.
Reassess Your Budget
The end of the year signals budget adjustments and new goals—especially this year. Maybe you realized you needed to tighten the belt on a few of your nice-to-haves to reallocate toward your needs. Or maybe you found new ways to save on groceries and whip up wallet-friendly recipes. Carry those lessons into your 2021 plan. Get started with a simple budget building session and make a list of your needs and wants for the new year. Be sure to cover your necessities and find ways to innovate your current spending habits. There are always ways to save.
Repurpose Your Savings
Speaking of saving, did you save too little (we’re talking about that emergency fund)? Perhaps you saved for vacations that weren’t taken or a home reno that was postponed. Take inventory of those savings you did and didn’t have in 2020 and evaluate how your savings buckets can be repurposed. If your annual vacation fund wasn’t used, you could put it toward your home reno this year, or even put it into retirement. On the converse, if you took a financial hit because of unforeseen circumstances, start 2021 off with a strong goal to build your emergency fund. You never know when you may need it.
Prepare for Tax Season
Surprisingly, it’s not too early to begin thinking about your tax return. Did you know you can submit your 2020 taxes as early as January 27, 2021? In fact, you can plan for the best time to submit your return depending on your annual financial plan. For instance, if you know you’ll have money coming in from your return, you can submit your taxes via electronic file in late January, and possibly have your return by February. If you plan to owe money after filing, you can wait until the official deadline to file so that you can free up money in the first quarter of the year and plan for the expense.
Have a Plan B
Many of us have a retirement plan in place. Some are chugging along until 67, and some are headed out early at 60. Whenever your time, even the best-laid plans can go awry. Because of the pandemic, many Americans had to retire earlier than scheduled due to layoffs, downsizing or health problems. The lesson learned—save like you’re retiring earlier than you plan to. If you go out on your own terms, you have extra saved, and if you don’t, that padding may come in handy.
Though we don’t know what 2021 holds, we do know that preparation is key to a successful financial year. Get ready for a new year and make your plan now for a brighter 2021.