5 Financial Goals to Set for 2021December 28, 2020
2020 will likely go down in history as one of the most trying years that the world has experienced. At the core of the dismay in 2020 lies the COVID-19 pandemic, which sideswiped the goals that many people had for 2020 and changed our lives in ways we didn’t think were possible.
While the pandemic is still far from over, it’s hard not to hope for a better year ahead in 2021. Here are five financial goals you can set for 2021 that will help you leave 2020 in the dust.
Build Your Emergency Fund
If 2020 has taught us one thing, it’s that you can never be too prepared for emergencies. Many experts say that it’s smart to have at least $1,000 put away as a safety net, but as many have learned, that simply isn’t enough. In 2021, set a goal to save up at least one month’s worth of expenses in case you’re faced with a difficult financial situation. Once you have one month’s worth saved, aim for three.
Pay Down Debt
When looking toward the year ahead, formulating a strategy for paying down debts should be at the top of your list of priorities. Whether you have student loans, a car loan, a mortgage, or credit card debt, tackling your debt head-on is the best strategy for saving money long-term. Two popular strategies for paying down debt quickly are the debt snowball method and the debt avalanche method. The debt snowball method involves paying off your lowest balances first, and the debt avalanche method involves paying off your debt with the highest interest rate first. Setting a goal for paying off specific principal balances and determining how much you’ll need to pay in order to reach those goals will make repayment easier.
If you’re in good credit standing and have a stable income, one option for paying down debt faster is refinancing your loans. We are currently in a historically low interest rate environment, so refinancing to a lower rate on your mortgage, student loans, or car loan could help save you significant money over the life of your loan. Education Loan Finance offers low rates and flexible terms for student loan refinancing.*
If you’re still in the early years of your career, now may be a good time to start making your money work for you by investing. Investing is a great way to save up money while also accruing wealth over time, allowing you to reach financial goals like retirement. While investing may seem like a difficult task, the good news is that it’s easier than ever to get started.
Before you start, formulate a plan for how much you will invest, decide on your short and long-term goals, understand your risk tolerance, and most importantly, decide where you’re going to invest your money. Check out our Millennials Guide to Investing to help you make these decisions.
Cut Out Unnecessary Costs
With all this money going toward your emergency fund, paying off debt, and investing, you’ll want to do everything you can in 2021 to eliminate unnecessary costs. Deciding where to cut costs depends completely on your individual priorities, but it’s always good to start by listing out all of your expenses and deciding where you can sacrifice. Some example of areas where you could cut costs include:
- Dine out less frequently
- Make coffee at home
- Internet and streaming subscriptions
- Utility costs
- Shop around for insurance
- Change phone plans
- Make gifts for people
Save for Travel
The pandemic obviously limited everyone’s ability to travel and vacation – with the pandemic still running its course, rather than spending your money elsewhere, 2021 could be a good time to save money to travel once things go back to (a new) normal. Getting some destinations in mind while we’re still staying at home not only will allow you to plan financially, but it will also give you something to look forward to during trying times.
We’re all looking forward to a fresh start in 2020. If you keep these financial goals in mind and set clear goals for yourself, 2021 could be a great year for you and your wallet. Visit the ELFI blog for more tips on achieving financial freedom.