Home » Blog » Financial Resolutions to Make in 2021 To say 2020 was a challenging year would be an understatement. Tough on our mental and physical wellbeing, and even tougher on (many of) our wallets. It’s okay if you didn’t get to achieve the financial goals you set out to last year. If you’re like pretty much everyone else, your priorities had to shift quickly to make sure you could weather the storm that was 2020. Thankfully, we’re finally free to toss out last year’s calendar, try to forget it ever happened, and begin anew. Let’s start 2021 with a fresh set of financial resolutions. Ones that are meaningful, achievable, and meant to improve your financial fitness. We have a few suggestions of our own for you to consider, but before that, let’s make sure you’ve got your goal-setting strategy down pat. Let’s set some SMART goals It’s a new year – why not try a new goal-setting strategy? If you’ve never heard of SMART goals, your goal-setting ability is about to get a much-needed upgrade. SMART is an acronym that stands for: Specific – Not ambiguous, clearly defined Measurable – Includes criteria that measure your progress Achievable – Attainable, goal is within reach Relevant – The goal matters to you and is personally meaningful Timely – Includes a start date and finish date If you’re going to set goals, make sure they’re SMART – you’re much more likely to accomplish them over more general ones. Take a look at the examples below, and you’ll see why. A general goal is “I want to save more money this year.” A SMART goal is “I want to save $3,000 dollars this year to build up my emergency fund. I can accomplish that by setting aside $250 dollars from my income each month, or $125 dollars from each paycheck. By June, I’ll be halfway towards my goal.” As New York Times bestselling author Mark Manson puts it, “Specific (or SMART) goals act as a sort of GPS for your life. And just like the GPS on your phone needs a specific destination to be useful, our goals really only work when you have a specific outcome in mind.” So – if you’d like to make sure the goals you’ve set get accomplished this year, make sure they’re SMART. It’ll make a world of difference. One more goal setting tip Let’s say you have an ambitious goal in mind – one you really have to reach for. Our advice? Do yourself a favor and break it into smaller, more manageable chunks. If your goal is overly ambitious, there’s a good chance you’re going to lose motivation along the way because making meaningful progress will feel like it takes forever. If your goal isn’t ambitious enough, you’ll accomplish it quickly, but it won’t end up feeling that meaningful in the long term. As with everything else in life, there’s always a perfect balance. If you haven’t already, start creating your budget It’s not the most exciting thing in the world, but if you want your financial resolutions to stick this year, there’s no getting out of it – you need a budget. If this is your first venture into the world of budgeting, we’ve got a great place for you to start. It’s called the 50/30/20 Rule, and it’s truly as simple as it sounds. Here’s how it works: Start with your income. For the sake of this example, let’s say you take home $4000 a month. 50% of that $4000 will be put towards your needs, 30% can be put towards your wants, and 20% should be saved or invested. $2000, $1200, and $800 a month respectively. Needs: The absolute essentials – things like rent/mortgage payments, utilities, food, transportation, and healthcare. Wants: Things you could live without if needed – things like dining out, entertainment, subscriptions, vacations, and gifts. Savings: Can be put towards your emergency fund, saving for retirement, or used to pay off debt more quickly. Keep in mind, the 50/30/20 rule is just a basic framework. If you only require 40% of your income for needs and use 20% for wants, there’s no reason you can’t bump your savings up to 40%. Play around and find what works best for you! Not sure why you need a budget? Check out “5 Ways to Shift Your Money Mindset” to learn about everything a detailed budget provides you. For tips on how to most effectively track your weekly spending, take a look at our article “7 Financial Trainer Recommendations”. Pay down your debt If you entered the new year carrying debt, challenge yourself to start paying it down! Working your way towards being debt-free isn’t easy, but it’ll free up money that you can put towards the more important goals you have in mind. One of our favorite methods is called the debt snowball. We’ll give you a brief overview of how it works here, but if you’d like to learn more about the debt snowball in detail, you can check out the full article here. So – let’s say you have a few high-interest credit cards you’d like to pay off this year. Here’s your super-simple attack plan when using the debt snowball: Organize your debts from smallest balance to largest balance. Make minimum payments on every debt besides the smallest one. For your smallest balance debt, you’re going to throw all the money you can comfortably afford to throw at it every month. Once the smallest balance debt is paid off, move to the next smallest. Keep up the progress until you’re completely debt-free. Yep, it’s really that straightforward. You don’t have to come up with your own mastermind plan to pay off your debt – smart people out there have already shown us the easiest ways to do it. Build up your emergency fund If last year taught us anything, it’s that it’s crucial for us to save up in the case of unexpected emergencies. Now’s the time to begin contributing to your emergency fund if you haven’t already started – but how much money should you put in there? Start with a SMART goal of saving $1,000 – $3,000 for your fund. If you have the means, one of the best ways to do this is what we call “set it and forget it”. Organize your account so $50, $100, or $150 (really, whatever amount you’d like) is automatically deposited in your emergency fund once a month – you won’t even remember it’s there until you really need it. Having that safety net can take a huge amount of money anxiety off your mind, and the best part is, no amount is too small to get started. Your ultimate goal should be to have 6- 12 months of living expenses stocked up, but that’s something you can chip away at over time. Make a habit of checking your credit report If you weren’t already aware, the three major credit bureaus, Equifax, Experian, and Transunion, have been offering free credit reports every week since April of last year. Unless you’re currently applying or preparing to apply for new credit, there’s no real need to check your report this frequently – but taking a look once every few months is a very smart financial move. Why? Checking your credit report regularly will help you: Ensure your reports are accurate – Mistakes happen. And when they happen on your credit report, your credit score could be impacted through no fault of your own. Maintaining and improving your credit score is hard work – don’t let a couple of errors on someone else’s part take away from all the good work you’ve done. Spot fraudulent activity – There’s a new victim of identity theft every 2 seconds. A scary statistic, certainly. But here’s the good news: checking your report regularly can help you identify fraudulent activity before it becomes a major problem. Spot a few new accounts on your report that you’re certain you didn’t open yourself? If you immediately contact the bureau, there’s a good chance you can avoid any potential negative impacts. Get an idea of where you stand – To learn where you can go, you have to know where you currently stand. And as you gain a better understanding of your credit history, you can determine which financial products are worth pursuing and which are worth passing on. If your credit needs some work, there’s no sense in applying for products that are designed for people with great credit – you likely won’t get approved. And if you have great credit, why apply for a product with high rates if you could get approved for something with much lower ones? Get an idea of where you stand, and it’ll be much easier to find a product that aligns with where you’re at. Focus on your physical and mental health, too While your financial health is incredibly important, it doesn’t mean much if your physical and mental health is lacking. The three are closely interconnected, so make sure to spend some time focusing on them too! Here are a few tips from our article “How to Keep Your Mental, Physical, and Financial Health on Track”. Click the link if you’d like to check out more suggestions! Staying on top of your physical health The CDC recommends adults get 7 to 9 hours of high-quality sleep every night. To give yourself the best shot of making that happen, you should try: Putting your phone away at least 30 minutes before bedtime Going to bed each night and waking up each day around the same time Avoiding caffeine and alcohol a few hours before you go to sleep Regular exercise has been proven to reduce risk of heart disease, manage blood sugar, improve health and mood, and keep our minds sharp. Biking, dancing, yoga, hiking, rock climbing, rollerblading, traditional sports – the activity you choose doesn’t matter – as long as you’re keeping active. For good results, aim to get 30 minutes of moderate exercise at least 5 days a week. Taking care of your mental health People who feel more socially connected to others report lower rates of anxiety and depression, higher self-esteem, and greater levels of empathy and trust in others. Even if you’re a more introverted person, connection with others is a must. Why not give that friend you’ve been meaning to catch up with a call or find a new spot to grab lunch with an old colleague? Donating our time, money, or energy to a cause can give us a greater sense of purpose, expand our perspective, help us grow, and boost our self-esteem. If you’re interested in finding volunteer opportunities near you, is a great place to start. Whether you’re into human rights and advocacy, animal rights, or arts and music, there’s a good chance there’s something out there you’d find personally meaningful. 2020 was a tough year for everyone – let’s make sure 2021 is a year to remember. If you stick to the resolutions outlined above, you’ll be marching into 2022 more financially fit than you’ve ever been. Now start setting those SMART goals!