If you thought 2020 was a tough year financially, you’re not alone. When COVID-19 became a global pandemic, layoffs happened, debt rose, and small businesses struggled. But it’s a new year, and financial success could be right around the corner.
Many people are using 2021 as a financial reset. You can get yourself in good money shape by following these seven tips for a successful financial year.
1. Straighten out your credit
In 2020, your credit card may have had to come to the rescue one too many times. This year, it’s time to give a different card in your wallet some love — your debit cards. High credit utilization will hurt your credit score immensely. This year, take the time to learn and understand what affects your credit score. Here are five of the top factors that impact your credit score:
- Payment history
- Amounts owed
- Credit history length
- Credit mix
- New credit
Keeping your credit utilization low is important. In addition, you can consult a credit reporting company to see what else is hurting your credit score. Do you owe a large amount? Work on paying off debt. Is your payment history not great? Set up automatic payments. Knowing what you need to work on will enable you to take baby steps toward improving your credit in 2021.
2. Establish a budget
Creating a budget is essential if you want to spend less and save more. It doesn’t matter whether you’re living paycheck to paycheck or have plenty of money to live comfortably. A budget allows you to exercise discipline and see where your money is going.
Use an online budgeting tool to create a budget and stick to it. You’ll be amazed at how quickly your budget helps you achieve your other financial goals and save while doing so.
3. Cut out what you don’t need
While you’re in the process of creating a budget, ask yourself the tough questions. What expenses can I cut out? There’s always going to be essentials: food, rent, etc. When you lay out every monthly expense to your name, though, you’ll start to notice where your money is being wasted.
Cancel subscriptions that you don’t need and cut back in areas where you’re spending too much. This can mean switching to less expensive grocery items or finding ways to lower your utility bill. By trimming expenses and cutting back, you’ll have more wiggle room in your budget.
4. Make savings goals
Once you have a budget in place, you’ll be able to save a lot more. And when you’re making a conscious effort to save, you should have goals in place. Maybe you want to amass a down payment on a house or begin saving for retirement.
Make sure your savings goals are attainable but also as large as you can manage. The more you save now, the more your money will compound and multiply over time.
5. Start investing wisely
If you’ve never been an investor, it’s time to start. If you are investing, it’s time to do a pulse check. Are you investing your money wisely? Here are some investment tips for financial success in 2021.
Invest in more dividend-paying stocks
Dividend investing has grown in popularity over the last several years, perhaps because it’s a great way to make more passive income. If you can put a solid amount of money toward a wide range of dividend-paying stocks, definitely go for it.
In dividend investing, a stock’s performance matters less than with a growth stocks strategy. You just want to make sure the positions you hold are paying dividends.
Try different types of investing
You might have been on the fence about different types of investing in the past. But it’s a new year, and different options could lead to a world of possibilities. You may build a solid stream of income or find that you get excited by certain types of investing. Here are some to consider:
- Real estate
- Options trading
- High-value items
Any smart investor knows that diversification is key, so start mixing it up this year.
Research new companies to invest in.
If you believe in what you invest in, you’ll hold on to those investments no matter what. One-way top investors build wealth is through buy and hold strategies — buying a stock and holding it regardless of market fluctuations.
This year, make it a goal to find new companies to invest in. Research companies whose offerings or mission you’re passionate about. You never know when the next 2020 will happen. Make sure your investments are ones worth holding on to.
6. Look into side hustles
Additional work may sound like the least appealing thing after a tough year. Yet having an extra stream of income will give you peace of mind; plus, it’s actually easier than you may think to make money online.
Side hustles don’t have to be time-consuming or earn you the big bucks; even small amounts of additional income are useful. Consider side hustles where you don’t even have to leave your house: freelance writing, survey taking, or online tutoring are some good options.
7. Evaluate your tax situation
This year, make it a goal to get your taxes done as early as possible, but also take things a step further. Here is a simple way to get the most out of your 2021 refund:
- Adjust your tax withholdings with your employer to get your refund split between paychecks throughout the year
- Set up an automatic transfer or direct deposit into a high-interest-earning online savings account for the extra amount you have in your paycheck
- Sit back and watch your money grow
Changing your withholding might be a good option if you’re looking to make smarter financial decisions in 2021. That said, you may want to consult a tax professional before making any changes.
The new year has just begun, and it’s not too late to start making better financial decisions. It shouldn’t matter what happened last year — make 2021 your most financially successful year yet. By looking forward and working hard toward your goals, you hold the power to make this year great. – articlebase.com