There is no doubt that this year is a tough one and looking at money tips for 2021 could help you stay ahead of your finances. A lot of people are struggling financially because of the coronavirus that spread throughout the world. The health crisis that ensued rippled out to the world economies putting global markets to a screeching halt.
As the year is in its final month, you can go ahead and get started in preparing and making the coming year better than this one. That is easier said than done especially when it comes to your finances. Pew Research shared that because of the health crisis, there were over 20 million unemployed Americans in May of 2020.
With a lot of people losing their jobs, many were forced to re-evaluate the way they manage their finances. If you were affected, you had to make some drastic changes, you could have a different view on your finances right now. If you were let go from work, money management now is a serious thing. This is why money tips for 2021 are something you seriously need to look into. Here are some of them you can consider for the coming year.
Use your credit cards just don’t hold on to the debt over a long time
Experian shares that credit card balance stands at over $700 billion in 2020. Although this is the lowest it has been from 2017, people are still quick to blame their cards for their financial woes. One of the reasons for this is the high-interest rate of card lenders. Add the fact that there are several fees and charges you need to pay.
But remember that your credit cards are just financial tools at your disposal. At the end of the day, you are still the one responsible for the way you use your cards. The interest, fees, penalties, and other charges your lender adds will only apply if you choose to pay the minimum or miss one of your payment due dates.
This is why one of the money tips for 2021 you need to look into is properly using your credit cards. You can use it but make sure that you can pay the full amount at the end of the month. Missing a payment or choosing to settle only the minimum amount allows your lender to add all these fees to your succeeding bill. You can use your card but do not let the balance sit there for a long time.
Build your credit to save money with interest payment
According to CNBC, the average FICO score for Americans at the start of the year was 705 which is already good. You need to keep in mind that investing time and effort in keeping your credit score up can save you money in the future. It could be quite difficult to try and work on your credit score especially because you rarely check on it.
But keep in mind that the times where you need it is when you are making a big financial decision. It could be applying for a new card, taking out a personal loan, or even when buying a house. Your credit score will start to matter. The higher your score, the more your lender tends to trust you with the loan approval. This is a reflection of how you take your finances seriously.
It is for this reason that improving your credit score is one of the money tips for 2021 you need to consider. The earlier you work on it, the better it can be when the time comes that you need it. The lower interest rate lenders will give you for having a high credit score can help you save money in your loan payments down the line. This is money you can set aside for other financial goals you have for the future.
High income does not make you rich
If you believe that a big take-home pay at the end of the month instantly makes you rich, you might be in for a big surprise. It is not how much you make that matters, it is what you do with it that counts. You could be making six figures a month but if your expenses are the same or even more, then you end up with almost nothing each month.
What do you do with your money? How do you spend it? Do you invest it in your future? These are just some of the things you need to consider if you want to make the most out of your monthly income. Make sure you set aside most of what you make every month to help sustain you in the future.
You should be your biggest debt payment
One of the biggest money tips for 2021 you need to consider is paying yourself first. You need to be one of your biggest expenses every month. No, it does not mean that you go out and shop for new clothes or pairs of shoes every payday. It does not also give you the license to start shopping for your hobbies online every payday.
Paying yourself means setting money aside for your future needs. It can also mean spending on training to help you develop your skills. Think of this as paying a ridiculous amount of money for your future self. Of course, you need to make sure that you also meet all other financial obligations you have every month. And when the time comes that you start to earn more, choose to save more rather than spending more.
Spend below budget
Living a frugal life is one of the best money tips for 2021 you can choose to do. This will help you create more elbow room and separation between your income and expenses. One thing to keep in mind is that you need a comprehensive household budget to make this work. You have to be certain what your exact expenses are. From there, you can find a way to spend less than what you budgeted for.
Set and forget
As technology develops at an astounding rate, you can take advantage of that by using it for your finances especially with your debt payments. Talk to your lenders about enrolling some of your regular payments through an auto-debit program. This ensures you pay your creditors on-time every month without fail. This can even help you get a reduction in interest fees for some of your qualified student loan debts.
One of the money tips for 2021 is to spend big the right way
This could confuse a lot of people but spending on big-ticket items typically means taking on debt. This is usually the case when buying a house for you and your family or even a car. You can save up before buying these big-ticket items but that could take a long time especially for middle-income families. This is the reason why you need to take out a loan for it.
When you do, make sure that you are doing it for all the right reasons. It also helps if you can do it right the first time. Before buying a house, make sure that it is something you can afford. You do not want to be tied down to huge house payments because you wanted extra rooms in the house. Before you put down a huge down payment and commit years of your income to payment, be sure you can sustain that payment.
There are a lot of money tips for 2021 you can look into and consider to give you a head start for the coming new year. This can put you in a better financial position especially with everything that happened in 2020.