As this year draws to a close, many will be setting new year's resolutions. And so now is a great time to start thinking about the money moves you should make for the New Year. With a new calendar to fill with ideas, why not pencil in time to make money moves that could change your life for the better. Let’s take a closer look at the best money moves to make for 2021.
Keep in mind that when it comes to making money moves, they are not just designated for the new year. You can make money moves at any time; for a new season, a new month, even for a new day! With that being said, let's get into it!
Why should you make money moves?
Before we dive in, consider the reasons why you should make changes to your personal finances this year. Each year, you have the opportunity to look at your finances through a new lens. You can choose to take advantage of the financial refresh and recalibrate for better finances every year.
Why not use this moment of change to reflect on your financial situation? With intentional actions to improve your finances for the better, you can completely change your financial future over the next year.
10 Money moves to make for the New Year
If you want to make major changes to your finances, then check out these top tips to help get your finances ready for the upcoming year. You can tackle these items all at once or take them one day at a time. But if you make your way through this list, your finances will be changed for the better.
1. Review your money goals
Setting money goals can be a great way to keep your finances on track. You should set short-term and long-term goals for your money. A few good examples include saving up for a down payment on your first home, paying down your debt, increasing your retirement contributions, building a sustainable passive income stream, or saving for a luxury vacation.
Whatever your money goals are, take some time to make sure that you are on your way to reaching these goals. If you haven’t made as much progress as you hoped, then look at the reasons for that. Seek out ways to make substantial progress towards your goals this year.
Need some help creating the financial goals? Take our free course to help you set the right financial goals for your life.
2. Prepare for tax time
As we steam through our New Year celebrations, tax time is just around the corner. If you expect a tax bill this year, make sure that you have the funds on hand to cover the cost. As a rule of thumb, you may owe taxes if you have a side hustle, small business, or earn income through investment opportunities. If you only work a W-2 job, then it is likely that your taxes are already coming out of your paycheck.
If you aren’t sure whether or not you will owe money on your taxes this year, consider talking to a tax professional early in the year. This can give you the time you need to save for this substantial bill. Also, the IRS.gov website has an Interactive Tax Assistant (ITA) to help andwer common tax questions.
Checking in on your taxes can be an eye-opening moment. You might realize that you don’t earn as much as you thought when you consider your take-home pay.
3. Boost your emergency fund
If the recent pandemic has taught us anything, it's that life is an unpredictable ride. But you can prepare for the unexpected by building a substantial emergency fund.
Most experts recommend setting aside between three to six months of expenses in an emergency fund. With that money, you’ll likely be able to cover any emergencies that come your way. If saving months of expenses sounds daunting, then get started by saving $1,000. With those funds in place, you’ll be prepared to cover some unexpected expenses without dipping into debt.
Need some inspiration on how to save more money? Check out these top money-saving challenges.
4. Add to your retirement accounts
Although retirement may seem like a distant goal, saving for retirement early is critical to your long-term financial stability. Take a closer look at your retirement savings strategy, or create a plan. This money move is a critical part of your financial future. Don’t underestimate the importance of getting your retirement savings on the right track.
5. Increase your income
It can be hard to meet some of your money goals without increasing your income. Luckily, there are dozens of ways to build a successful side hustle. Although a side hustle will require hard work and determination, it is completely possible to build a successful side hustle in the New Year.
Another way to boost your income is to focus on building passive income streams throughout the upcoming year. The upfront work required can be tedious, but the long-term payoff of passive income streams can be worth it.
6. Check your credit score
A good credit score is an important part of a solid financial foundation. Without a good credit score, it can be difficult to get competitive financing for big purchases like a home. Unfortunately, that could lead to more expenses throughout your life.
Since a credit score is such an important number, it is important to check on it regularly. If you find that your credit score has dropped, then take action to improve it.
Need help getting started? Take our free course on how to build and improve your credit score.
7. Automate your finances
Automating your finances for the New Year is my favorite money move. You can set up your finances based on your priorities and then set it on autopilot. For example, you can automate your retirement savings and bill payments to ensure that you are staying on track.
Keep in mind, when it comes to automating your finances, you can simply start with one or two things and then add on. Be sure to check in often to make sure the transactions are occurring as expected.
8. Double check your life insurance
Is your family’s financial future protected? Without the right life insurance policy, your family could be left in a difficult financial position if anything happened to you.
Luckily, you can quickly update your life insurance coverage. First, decide whether you need whole or term life insurance. Then find a policy that works for your budget and provides the coverage you need.
9. Create a budget for the New Year
Creating a budget for the coming year is a critical part of your financial success. You can set up a budget that works for your lifestyle and your money goals. When you build a budget that works for you, it can help you stay on track. It's also a good idea to leverage a budget calendar.
Take a minute to consider your expenses and your money goals before diving into your budgeting plans. Need help creating a budget that works for you? Take our free course to set up your budget correctly.
10. Take care of yourself
As you tackle your finances and stare at the list of things you want to accomplish across the spectrum of your life, don’t forget to take care of yourself. The changing season can be a stressful time of the year.
Make time in your life to stay healthy. Luckily, it is still possible to save money while living a healthy lifestyle. Keep your mental and physical health a priority in these trying times.
The bottom line
The New Year is the perfect time to make money moves. As you explore your finances for the upcoming year, try to include these effective financial strategies in mind! Here's to an incredibly successful new year!