How to Start Out & Stay Financially Strong in 2021
With many households developing a financial game plan for the first time and others revisiting outdated or inadequate ones, families are focusing on their financial futures in 2021. Wherever your starting point, here are some ways to start off strong:
Build Up Your Emergency Savings
Automating – and diversifying – your Savings can help you build this vital savings account back up if you saw it diminish last year. About 46 million Americans had completely used up their emergency savings only six months after COVID-19 was declared a pandemic in 2020, according to a survey conducted in August.1 The largest age group who responded this way were older millennials (26 percent), followed by Gen Xers (25 percent). As a rule, try to save up at least six-to-eight months of living expenses in a high-yield savings account in case you lose your current income stream.
Pay Off High-Interest Debt
If you are one of the 110 million Americans struggling with credit card Debt, start the New Year by developing a debt reduction plan that works for you.2 Writing down everything you owe, negotiating with your creditors, using every windfall as a credit card payment, and completely changing your lifestyle habits are ways to contribute to paying off what could quickly become a crippling problem.3 The average American household owes about $8,860 in credit card debt.4
Review Your Goals and Budget
Whatever your financial goals may be for 2021, updating your budget to meet those goals is the key to getting there. If your aim is to pay off unmanageable credit card debt while building up your emergency savings, your strategy might be cutting back to a barebones budget allotting only for the basics like housing, food, utilities, transportation, and bills, and leaving everything else to paying off debt and building up the emergency fund.5 If saving for retirement is your number one priority, set a realistic savings goal amount for yourself with careful consideration, and create a budget to help you reach that goal. Make sure you’re taking full advantage of the matching opportunities your employer may offer if you have a 401(k) and other long-term savings options available.
1. CNBC.com, “Nearly 14 Percent of Americans Have Wiped Out Emergency Savings During Pandemic,” September 1, 2020 2. Bankrate.com, “How to Pay Off High-Interest Credit Card Debt During Economic Downturn,” April 16, 2020 3. CNBC, “Seven Tips for Tackling Your Credit Card Debt, From Someone Who Paid Off $100,000 in Three Years,” September 24, 2020 4. Debt.org, “Key Figures Behind America’s Consumer Debt, viewed September 24, 2020 5. Money.USNews.com, “Things to Do When You’re Deep in Debt,” September 16, 2020
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