This year has been a wake-up call for more than just personal health and self-care. With so many job losses and economic uncertainties, we should take a hard look at managing your money and maybe even reassess our idea of financial security.
Most of us were caught off guard this year when COVID 19 started and work places had to be closed for over 3 months.
This post is to help you prepare for moments like this and know how to manage your money and survive, whatever the circumstances.
Now is an excellent time to look at your overall financial picture and set financial goals for the coming year in terms of managing your money.
With less opportunity to spend, you are becoming more aware of your saving tendencies and knowing what needs to change your bank accounts.
These tough times can give us lessons to learn something valuable about our financial habits. Show us what we might need to establish a more secure financial situation in the future.
A few questions to ask yourself first that will help manage your money in 2021.
Have you set money set aside for emergencies, and how much?
Do you track or review your spending?
Do you know your credit score?
Do you know the approximate interest rates on your loans, credit cards, and savings accounts?
If you are ready to be the boss of your money, I will take you through a few steps on how to start managing your money better. But first, find out where you stand financially by taking this financial wellness test.
Now that you are done with the test and where you stand with money let’s talk about some valuable financial lessons I have learned from the pandemic.
4 Valuable Lessons about Managing Your Money
Having a Budget is crucial
Your number one financial goal for 2021 should be creating a well-organized budget if you don’t have one already. With a budget, you will have adequate resources for the things you need and the essential things.
Now that COVID has deemed a shopping splurge as non-essential, this is the right time to write down all your essential spending and know where your money is going.
Some people say they have the budget in their head or already know what they spend every month. The TRUTH IS! You cannot possibly remember every little thing you spent your money on in a month.
However, seeing it on paper or your laptop helps you visually bring your expenses to life. Having a spending plan keeps you out of debt.
One most effortless way to review your monthly spending is by downloading your online bank statement and viewing each transaction. Then group the transactions to get a bigger picture of where your money is going.
You can then use this budget template for free and start spending wisely.
You Need a Money Management and Savings Plan
Now that there is a budget in place, next is Money management. These are strategic practices that provide you with the highest value for any amount of money you spend.
Savings as a bill: You should start by adding savings as a fixed bill in your spending plan.
Open a Savings account: Set up a separate savings account and set up automatic transfers from your checking account to a savings account each time you get paid.
Create saving buckets: Within your savings account, create different fun savings buckets to help you put away money for your specific personal goals. Maybe you want to vacation in Spain, make a saving bucket for Spain.
If you are planning on buying a home, then create another bucket for Home. In the long run, you have a savings account that is intentional and easier to track your goals.
Be Prepared: Have an emergency fund that is separate from your savings account. Your emergency fund helps you be prepared to pay for unexpected emergencies without borrowing a loan or using your credit card debt that will create more debt and stress.
Dave Rumsey suggests starting with a goal of $1000 and putting aside what you can on that $1,000 account until you raise it to six months of monthly expenses as you pay off your other debt.
Open a college fund: Knowing how expensive college is these days, you wouldn’t want your kids completing a four-year college with a $80,000 loan. The earlier you start saving for the kids, the better it is for both you and the child.
You Do Not Need Extra Credit Cards
Since the start of the coronavirus lockdowns, many people have lost their jobs. Some have had to put more charges on top of their existing credit card debt to help pay for essentials.
Credit cards are a great tool. Having one or two credit cards is manageable. More than 2 credit cards is inviting more debt.
Avoid using credit cards as part of your emergency fund due to the high-interest rates involved unless you are using a credit card that does not charge interest on purchases for a certain number of months after account opening. You can repay that amount before the offer expires.
Spending Habits Have to Change
Who knew that Lysol disinfectant wipes would be hot commodities? It is the time to evaluate if what parts of your spending are truly necessary as part of managing your money.
I’ve saved a lot of money in the past six months, mainly by not buying clothes and shoes I don’t need. And frankly, I don’t miss the spending or the new shoes.
The pandemic has shown us that we do not need all the extra stuff we used to spend money on to be happy. I have learned that being grateful for what I have and what we have is enough.
Can you imagine all the things you thought you couldn’t live without? Well, You are now living without them. If you are eating out less, you are cooking more and, you are saving more money. We are now adopting healthier options and might want to make this a more beneficial lifestyle change.
A lot has been going on this year, emotionally and financially. It is the year to change how we live and spend money to prepare financially for 2021 and the next years to come.
As financial expert Dave Ramsey says, “You will either manage money or, the lack of it will always manage you.”
Your can achieve your financial goals no matter where you are on your journey. I encourage you to incorporate these Valuable Lessons from this year, and start Managing Your Money in 2021.
For more financial tips and advice, check out what I posted about Tools and Tips to help you gain over you finances.
Let me know how you are managing your money, and what money management goals you have set for 2021. I would love to hear from you.