Given the unprecedented circumstances of the pandemic, many individuals find themselves in difficult financial situations. Many people lost jobs and are handling the abrupt loss of income. Even those who kept jobs find themselves faced with unexpected expenses, such as paying for childcare or tutors for kids who are falling behind with online schooling. So, many individuals were forced to put saving on the backburner. Here are a few financial tips that can improve your savings habits in 2021.
Save With Purpose
Half of 2021 New Year’s resolutions were about saving more money. While saving money is a great goal, you can make this broad goal more actionable if you focus on what you are trying to achieve. Name your goal, determine how much you need to save and by when, and make a plan of how to achieve this goal. By specifically defining your savings objectives, you can visualize your reward and motivate yourself to achieve your objectives.
Buy What You Love
Our spending was altered in 2020 due to the pandemic. Many of the activities we once enjoyed became unavailable, such as traveling or dining out. As a result, many people gained a sense of what they really enjoy spending their money on. Ordering take-out may have become a huge time-saver and stress-reliever and is something you want to plan for in 2021. Thinking about our use of money allows us to adjust our budgets to prioritize the spending on what we enjoy most. We may be more willing to set extra money aside when we know it will contribute to something we really appreciate.
Allocate Your Budget
Budgeting is a great way to keep spending in check. Allocating the budget allows you to categorize spending and ensures that you can afford spending on what matters the most. There are an endless number of different ways to decide how to allocate your budget. One rule of thumb is to utilize a 50-30-20 rules. 50% of the budget goes to needs, 30% will go to wants, and 20% will go to long-term financial goals. A person following this budget may reserve 50% of their income for rent and groceries, 30% on any activities they enjoy or eating out at favorite restaurants, and 20% is contributed to savings or paying down debt. Most credit card apps allow categorizing spending for you. Free apps, such as Mint, will also track expenses across all of your accounts (or as many as you link to the app). Another option is to hide your credit cards in a drawer for a month and pay for everything in cash. This way you will only spend your allocated amount and won’t have the temptation of swiping your card at the tip of your fingers.
Make It Difficult to Cheat
Even the most financially prepared and self-disciplined of us can slip from time to time. The key to blowing a budget is to protect your assets from, well, yourself! One way to do this is to protect your savings by making it difficult to access. Put your emergency fund in a bank that is an hour away, or more, and cut the ATM card. This way you can ensure you stay on track.