This year has undoubtedly been a tough one for all of us. As another year comes around, with expert planning and advice, it is possible to take charge of certain aspects of your life, like your finances.
If 2020 was a difficult year, and especially if you had to dip into emergency savings, the goal of 2021 may be to rebuild. No one anticipated this pandemic, but those that successfully made it through the pandemic from a financial perspective often had that emergency fund in place for something exactly like this.
In terms of the big picture, most economists have forecast a slow but steady recovery from 2020’s shock downturn, so there are things to be hopeful about when looking forward. It’s important to point out that we need to embrace a long-term view of things to make this happen. Developing a plan is not enough, executing and sticking to it is the key.
One of the most effective ways to make this happen is to think of planning as a five-step process:
- Get started by getting your budget done. Look at your actual spending and decide what you really need and what you don’t. Be realistic.
- Ask yourself how you might cope with any financial crises that might come your way. Being prepared for potential changes in your income means it will be easier for you to cope if these circumstances happen. The idea is to stress test your spending, ask yourself how would you cope if you had less money than you had planned for?
- Simplify things. If for example you are insured with more than one provider, it might be better to aggregate your cover and get rid of overlap by going with a single provider.
- Take advantage of things that can assist you. It’s possible you may qualify for tax or small business relief in some way, don’t let this opportunity slip away. If you’re struggling to make fund payments, maybe look at a retirement preserver option.
- Set yourself goals. You should set yourself a new financial plan every year. Things change all the time and it is essential to know where you’re going. Focus on one goal and just make that happen. Change the total amount in an emergency fund — while financial planning 101 typically suggests three to six months of living expenses, after this year people may want to strive for nine months or more.
We wish you a very healthy and happy festive season and an even better 2021!