If 2020 has wreaked havoc on your finances, you may take heart in knowing that you are not alone.
A recent survey of Americans’ personal financial health by Lending Tree and Stash found that because of the economic impact of the COVID-19 crisis, 1 in 4 people expect to retire later than anticipated. The study shows that nearly half of American consumers were unprepared for the negative fall out of the pandemic.
But if 2020 was a financial disaster for you are your family, you can take back control of your finances in 2021 by following a few simple steps. The key is to think differently, to build financial muscles and to plan ahead.
These tips will help you take control of your finances:
1. Pay yourself first:
I know this now sounds like a cliché, but the reason this many Americans were unprepared for the financial fallout from the pandemic is because most people and families have little or no savings. You must ensure you are saving money every month.A good rule of thumb to follow is to save 15% of your salary each month and put it into an account that earns interest. Better still, automate the process.
2. Pay your bills on time:
Obviously, that’s the responsible thing to do. If you are in the habit of having someone else handle your bills, begin doing them on your own and understand them.
Take one day a month to sit down, go over your bills, and pay them. Better still, put them on auto draft to help you avoid late fees and penalties. You may even use your bank’s bill pay services to save you time.
Additionally, understand interest rates and fees on your loans and credit cards. If possible, negotiate lower interest rates with your creditors. And check your credit report and credit scores once every quarter.
3. Consider getting a consolidation loan:
If you have a lot of installment loans and credit cards, you may want to consider getting a consolidation loan. This type of loan combines all of your payments, so you just make one per month and save money on interest fees. Be sure to do your due diligence and sign up with a reputable company.
4. Consider refinancing your mortgage:
When interest rates are lower than the one you started your mortgage with, you may be able to save thousands of dollars on your mortgage by refinancing. This is particularly true if you intend to stay in your house for years. Do the math to see if refinancing would be advantageous for you.
5. Plan for major expenses ahead of time:
Whether its vacation or purchasing a household appliance, plan for it ahead of time, do your research and shop around for best deal. Set up a special savings account for it.
If you are already struggling with debt, do not dig yourself deeper into hole by charging vacation or major appliances to your credit card.
Car repairs may need a special savings account too. Remember, when it comes to vehicles, particularly older ones, it’s not a matter of if, but of when you will need to do some repairs. Thinking ahead and having a special account for these repairs can help you stay in control of your finances.
6. Raise your income:
There is only so much you can save and cut back when your income is limited. You can achieve your goal of taking back control of your finances faster by raising your income. See if you can get a raise at your job; or get a second job.
Better still, start your own side hustle. In this age of the internet, it’s never been so easy – and cheap – to start a side hustle. On this website alone, we have written about several home-based businesses you can start to earn you part-time or even full-time income.
7. Make investments wisely
Investing in your future is good for you and your family. Indeed, if you want to take control of your finances to the next level, you have to start buying investments. Spend some time to educate yourself on how investments work. Seek professional help from a financial advisor if you’re unsure which investments would be right for you.
8. Raise Your Financial Literacy:
Never assume you know it all when it comes to money and finances. The number one reason why many people end up in financial mess is because they are financially illiterate. You don’t know what you don’t know.
Indeed, I believe that one of the most important things you can do to start taking control of your finances in 2021 is to raise the level of your financial knowledge and expertise.
There are many tools out there, both free and paid, you can use. Check with your bank or credit union to see if they have something you can start with. If your place of worship or local library offers some classes, take advantage of those.
Rethinking your finances may take some patience on your part. These tips will help. Just try one strategy at a time. Once you get used to that strategy, add another. If you need further assistance, it could be beneficial to hire a financial planner to guide you through the details. But whatever happens, do not throw your hands up in despair and do not surrender. Take control of your financial destiny.