It may be well beyond New Year’s, but that doesn’t mean resolutions and goal setting are out the window. Any time can be an excellent time to revisit habits, make goals, and get your money right.
That’s where a good old-fashioned to-do list comes in handy.
In a digital hangout with SoFi members, Lauren Hage, YouTuber, podcaster, writer, and co-founder of The Financial Diet , took Lauren Anastasio, a certified financial planner at SoFi, through her list of 2021 financial tasks anyone can accomplish.
Here’s what she suggested to start the year on good financial footing.
1. Set Realistic Money Goals
Many people don’t follow through with their financial goals because they’re not specific enough.
If someone wants to pay off credit card debt within the year, they’re more likely to accomplish that using the SMART method, Hage said, adding that “I use SMART goals for business, too; it’s not limited to just finances.”
A SMART goal is specific, measurable, attainable, relevant, and time-based.
Take the example of credit card debt:
• Specific. Be clear about the goal. Is the debt all on one card or on multiple cards?
• Measurable. Figure out how much money is needed to achieve the goal. Exactly how much credit card debt is there, down to the cent?
• Attainable. Make sure the goal is reasonable based on income and lifestyle. How much room does the monthly budget have for additional credit card payments?
• Relevant. To stick with a goal, it should align with personal values and long-term vision. How does paying down credit card debt help set you up for the future?
• Time-based. Make the goal for a specific day, rather than someday. If you can afford to put a certain amount a month toward credit card debt, how soon can you pay it off?
“If it’s arbitrary, it could feel impossible,” Anastasio said. Setting a SMART goal can break one big objective into smaller, achievable goals.
2. Revisit Your Liquidity
2020 threw most of us for a loop budget-wise, Hage said. Many had to dip into emergency savings or make lifestyle changes that affected budgets.
Now’s the time to take a look at your liquidity. How much cash or cash equivalents do you have on hand?
Having money that’s easily accessible can come in handy in an emergency or during unemployment, of course. An emergency fund can be three to six months’ worth of savings for essential expenditures, Anastasio said, and it varies from person to person.
Self-employed people or entrepreneurs may choose to bulk up emergency savings for up to a year’s worth of essential spending, but a married couple with no kids and low rent might only require three months.
Take the time to check how much emergency savings you have and determine how long it’d last if the going got tough.
3. Find Changes You Want to Make in Your Budget
Looking at spending can be just as important as forming healthy habits moving forward.
Hage makes it a practice to go through her bank statements every few months. “I highlight purchases I can’t remember,” she said. For her, this helps track and correct mindless spending or purchases that didn’t bring her joy.
When Anastasio tracks her expenses, she keeps an eye out for any recurring charges like a gym membership and subscription services that she admitted she often forgets about.
“You may want to revisit that spending,” the financial planner advised, and determine whether to keep or cut indulgences.
When you review past spending with a kind eye and mind for what brings you joy, you just might find that some purchases aren’t necessary. Use that reflection moving forward, and create a budget that brings you joy.
4. Learn Something New About Taxes
With tax season upon us, now is the time to learn more about this dreaded time of year, Anastasio suggested.
“There are ways we can break out the mystery of taxation into bite-size chunks,” she said.
For example, 2020 saw many first-time investors entering the market and buying stocks, Anastasio said. “For anyone who is a new investor, you are going to get a 1099 form for your investments” in mid to late February. Many filers might not be aware of the form, so learning a thing or two about investment taxes could help.
While we can’t all be tax professionals, it’s worth Googling a term or two to understand what it means or asking a tax professional what precisely a particular form does.
Taking time to learn a little about anything from investment taxes to income tax can be empowering. Even understanding just a bit more could mean marking smarter money choices year-round.
5. Keep Good Habits
Whether 2020 was an unexpected year financially or you decided to dip into savings for some holiday spending, now might be the perfect time to get back on track.
But, Hage said, it’s essential to be kind during times of reflection. Don’t beat yourself up, but help yourself prioritize good habits moving forward.
Anastasio recommended checking in on “big ticket” spending that can cause financial anxiety.
“We tend to splurge as a society when it comes to housing and cars,” she said. Keeping up with mortgage, rent, or car payments can lead to stress each month.
Another beneficial habit: automatic transfers to savings, retirement accounts, or loans. Is there space to increase those contributions?
Look for places in your budget where you can pat yourself on the back, and try to replicate those good choices. That could be anything from making extra loan payments to maxing out a 401(k) match or adding to an emergency fund each month.
6. Check Your Insurance Coverage
“If COVID has illuminated one thing, it’s just to consider coverage as big choices come around,” Anastasio said.
The pandemic has made many of us think about our health more often. You may want to look at your current health insurance to decide if it provides adequate coverage.
Anastasio suggested talking to your employer’s HR rep to understand your current coverage or meeting with your health care provider to decide what plan might best meet your needs.
In addition to health insurance, it could be a good time to review homeowner or renter’s insurance, and to consider a life insurance policy.
The Takeaway
Reflecting on past spending and setting SMART goals can empower anyone to make better money moves. These six steps can help you take control of your financial health, even during a trying time.
Tracking spending and saving is easy with a tool like SoFi Money®—a mobile-first cash management account.
You can deposit all of your checks directly through the SoFi app, make P2P payments, and withdraw cash fee-free at more than 55,000 ATMs in the Allpoint network.
And signing up for SoFi Money® unlocks a bevy of benefits for SoFi members, including complimentary, customized advice from a credentialed financial planner.
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