Happy New Year!!
It’s a New Year and we want to start it well. With the global pandemic affecting so many lives, we know that 2020 was a challenging one. Despite this, what type of financial commitments can we make for 2021?
Well-known English writer, Izaak Walton wrote, “Good company in a journey makes the way seem shorter.” And so, we want to make your 2021 financial journey better by offering insights to keep you in good company. Ready to begin?
With the first-of-January excitement behind us, we can now settle into the reality of the 300 plus days ahead. Whether you’re a resolution maker or not, it’s great to start the year with realistic financial commitments you can stick to. Don’t set too many that will be a challenge to accomplish. Instead, let’s set just a few and approach this year with optimism.
Here are some financial commitments we can consider for the New Year. Whether employing just one, or a few of these, they will help you on your journey.
1. Commit to Reducing Debt
A good place to start your financial commitment is to reduce your credit card debt. With so many homes affected by credit card debt, it’s important to look at this as a good starting point. Our previous blog on credit card debt outlines the different steps and strategies you can use to help.
When you look at all your debt, you can decide how much of that debt you want to eliminate this year, if not all. Here’s where you have to be realistic. One approach is to set a specific amount you want to reduce your debt by. Then you can calculate how much you would have to pay each month to reach that amount.
The key here is to reduce the amount of bad debt you might have. The way to do this is to set goals for yourself and not only set goals but activate Empowering the Possibilities’ three main principles of financial success and credit rehabilitation, which are Discipline, Dedication and Commitment.
Setting goals for debt reduction is the first step in your journey to financial freedom. To do so, writing a budget will get you on the right track to reducing your bad debt as well as your overall debt. With a budget, you will begin to identify where each dollar is going and how you can begin your financial commitment to having financial freedom and becoming debt free.
2. Commit to Saving Money
Another important financial commitment can be to saving money in 2021. Many are living from paycheck to paycheck and have hardly set aside any funds for the future.
You should have at least two savings accounts: one for your main savings and the other for your surplus savings.
The main savings is one that will not be touched until there is real need. And a surplus savings account is for the unexpected expenses. Both pay interest and give you easy access to your funds in case of emergency.
Commit to save at least 10% of your monthly income, and have up to three to six months of your living expenses in your surplus savings. Ten percent is an excellent start and one that is strongly recommended as a minimum. That’s just $10 saved for every $100 you earn.
If your employer or organization offers one, start a retirement account. It can be an IRA or a regular retirement with your job. Most companies will match what you put in (dollar for dollar) thereby doubling your savings. This type saving is future focused, and helps with your retirement expenses.
If you are an entrepreneur, you can even set up your own retirement account. Persons who are self-employed can look into Keogh Plans, a SEP IRA, a one-participant 401(k), and a SIMPLE IRA as four excellent options worth considering. The US Internal Revenue Service (IRS) gives clear guidance on the rules of each type of retirement account.
With the simple financial commitment to saving money, you will find there are a wealth of options and opportunities available to you. Used effectively, they can lead to your financial freedom.
Save Money and Money Will Save You.
3. Commit to a Financial Plan
By committing to a financial plan you are setting yourself up for financial success.
In setting up your plan, set time limits on each one of your goals and do not deviate from them. The plan will help you make wise decisions and will help you to stay focused on your goals. When you are committed to your plan you will spend wisely and will even find ways to eliminate unnecessary spending.
A financial plan helps you to see clearly and stay on course. Once you begin eliminating the unnecessary spends, you will have more money to put toward your saving goals. With your financial plan, remember to keep an eye on your budget and stick to it.
Having a clearly-defined budget is important to your financial commitment and success.
A budget is a plan for how your money will be used, based on evaluating your income and your expenses.
There are those who have a limited income, but they are still able to have a financial plan because they have activated the three principles of Empowering the Possibilities (Discipline, Dedication and Commitment). These principles serve as a form of personal accountability. Getting out of debt is a welcome byproduct of this commitment to having a financial plan.
4. Commit to a Financial Literacy
The sad reality is, far too many people are financially illiterate. And contrary to the populate quote, in this case, ignorance is not bliss.
According to Investopedia, financial literacy is, “the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing.”
Can you make the commitment to become financially literate this year? We believe you can. When you become financially literate it helps you to understand terms, concepts and ideas related to your financial health.
And by default, once you understand these skills and concepts you can begin to use them. A good start is with our Empowering the Possibilities blogs. We want to be a rich resource for financial literacy and learning that can help empower your financial dreams.
Financial literacy will help you to make sense of your finances, it will inform your decisions on planning and budget, and it can, potentially, make you less prone to fraud. From credit cards, to credit scores, to retirement plans, to different types of credit, to credit reports, and more, the more you learn and understand, the more successful you can become.
Imagine the possibilities when you make a financial commitment to learning all you can about your money!
We’ve only outlined four simple steps that you can take on your financial journey. We hope you will consider doing one or all of the steps. But, again, these are commitments. They will take intentional mental energy to stay the course and do what’s necessary to grow and learn in the process.
The days and months ahead will have their uncertainties, but we can be certain that if we make strong commitments, it can help us face the future. The beauty is, many others have taken a similar journey and made similar commitments, and have come through shining.
We know, and believe, you can do it too.
We would love to hear how this information inspired you. And let us know how many of the financial commitments you’ve decided to make.
For more insights on all the financial possibilities available to you, feel free to contact us or reach out to Empowering the Possibilities on Facebook and, of course, don’t forget to share this information with others.
Have a safe, productive and financially-empowered New Year!