It’s been a heck of a year, and I’m ready for it to be in the rearview mirror. Now more than ever, I’m determined to get a better grasp on my finances and start 2021 off right. Any advice? What are the most important financial resolutions you recommend? And do you have any tips for how to stick with them past January? —Turning It Around in 2021
Dear Turning It Around,
I’m so glad you’re thinking ahead about some realistic resolutions that you can adopt now and turn into healthy financial habits throughout the coming year. This is an especially keen time to take a close look at where your finances are and set some goals for where you’d like to be a year from now. Let’s explore some classic but very powerful financial resolutions.
Befriend a Budget
Let’s start with a look back at your 2020 budget. How did you do? Taking a retrospective look at what changed, where you went over, where you saved and what might be different next year is very important. If things are feeling pretty steady for you, go ahead and get a 2021 budget down on paper. If a lot is in flux right now, like employment and a lot of surprise expenses popping up, try a monthly budget that you revisit every four weeks. You can always move to quarterly reviews once things settle down, but only good things happen when you’re more honest with yourself more frequently.
If you didn't have a budget last year, welcome. Let’s get started. Write down everything that comes in and out of your bank account. Organize by necessities (and I mean real necessities, like electricity, water, mortgage, car payment, etc. Keep the latte habit out of there). That should comprise 50% of your income. In the next column, take your lattes and all your other discretionary spending items and make sure it doesn’t add up to more than 30% of your income. The last 20% of your monthly income should be going toward paying down debt or saving for goals. Our new Frost Plus Account comes with unlimited free* savings accounts so it’s a great way to get organized. You can create an account for each savings goal you’ve got, making it easy to see your progress! Or, if 2021 is the year of your first budget, consider that a resolution to be proud of!
Only good things happen when you’re more honest with yourself more frequently.
When you’re feeling stuck in a financial rut, reach out for help! Our team of financial specialists can help make a plan for a bright new year. They can help you uncover your objectives, set short-term savings goals or plan for achieving long-term goals like retirement or paying for your children's college education. These kinds of discussions should be educational, regardless of your budget. There’s nothing wrong with asking the questions; getting organized is the first step.
Pro tip: If you don’t have a budget, and you’re not saving for your retirement in some way, those will be the first things every financial planner will have you start with. You’ll feel accomplished if you make headway on those two areas before you schedule your meeting!
Check This List
This is a great little to-do list of financial health activities that should make it into your calendar every January. We’re all about keeping an eye on the state of things to prevent any issues and build up good habits.
- Pull a free credit report at www.annualcreditreport.com and report any discrepancies you see.
- Take inventory of valuable items in your home and store the list in your safe deposit box or another secure location. This can smooth out the insurance claim process if you ever need it!
- Review your employer’s benefit program(s) to ensure that you are utilizing all possible benefits such as dependent care and medical savings accounts.
- Review your payroll withholding. Visit www.irs.gov for a worksheet to help you identify any areas where you need to adjust your W-4 for next year’s taxes.
- Establish a collection box or file where you can keep tax information for the current year. Your information will be easily accessible when it’s time to file.
Keep Yourself Accountable
The hardest thing about a New Year’s resolution is sticking with it. The best way to overcome that obstacle is to bake accountability into your resolution! So, instead of just saying “I’m going to stick to my budget this year,” make “I’m going to give myself a monthly budget report card” your resolution. Depending on your personality, it might be more enjoyable for you to make a pact with an accountability buddy who you get together with at the end of each month (or quarter) and talk over how that latte habit is treating your bottom line. If talking it through isn’t for you, there’s great power in just writing it down. My very first budget was on a piece of legal paper that I kept in my purse. I couldn’t reach for my wallet without seeing it, and that kept me on track for a long time.
It’s simple, but it’s not easy: If you want to become more proficient with your financial life, give yourself a report card. What worked? What didn’t? Before you know it, it will become one of the most encouraging and empowering practices you have.
Frost Plus Account holders will have access to unlimited savings accounts with no monthly service charges.
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