Making 2021 the year to rebuild…
If 2020 has taught us anything, it is that it is very necessary to prepare an emergency fund because you never know when you could lose your job, get sick, or lose a loved one. As we begin in 2021, we encourage you to rebuild your finances so that you are prepared for any emergency that may occur. Many people were left scrambling when the pandemic started and they began experiencing a combination of reduced income, job closures, and layoffs. Being better prepared short term gives you time to plan and strategize how you will maintain and recover in the long term. Let start the new year by preparing yourselves with the gift of stability and a healthy savings account so that any unexpected obstacles can be overcome. The following are a few things we can do to help improve our finances in 2021.
Increase your income – Whether it is turning a hobby into extra income or getting a part-time job, increasing your income is a great way to fund your emergency savings account, pay down debt, and increase your monthly cash flow. According to a study done in 2019 by Dollarsprout.com, 57% of Americans had a side hustle and of those individuals, 36% reported making more than $500 a month. How wonderful would it be to have an extra $500 a month to add to your emergency account?
Emergency fund – If you are among the 40% of Americans who cannot cover an unexpected expense of $1000 or more, setting up an emergency savings account will give you peace of mind should you ever find yourself in the middle of a pandemic without a job. Having these funds will also eliminate the need to rely on credit cards for food, rent, or other expenses. Stiving to have at least three to six months [or more] of savings to cover living expenses in the event of a layoff, reduced hours, or suddenly becoming disabled is imperative to ensuring financial stability. Similarly, another type of savings account should be established for those over $1,000 unexpected events such as a broken major appliance or car repair. Having these types of emergency funds will alleviate financial stress so you are able to focus on your family during any emergency.
Increasing your credit score – Increasing your credit score can save you money on interest rates. Once you have increased your credit score, look at refinancing any high-interest rate debt. Refinancing debt for a lower interest rate will not only save you money over the life of the loan, but it can also increase your monthly cash flow by lowing your monthly payments. If you have high credit card debt, consider restructuring that into an installment loan. Restructuring your credit card debt can lower your monthly payment and interest rate while giving you an end date. An increased credit score can also lower your home and automobile insurance premiums. Be sure to do some shopping around when looking for Insurance. This research may take some time but it will ensure that you are getting the best rates available to you.
It is statistically proven that if you write down your financial goals and then track them, you are more likely to accomplish them? Not only does this strategy allow you to visually see your goals, but it helps to keep you focused and motivated. After the crazy year we’ve just been through, let’s refocus and work on becoming the best financial version of ourselves. If you need some help designing a plan to be financially successful in 2021, contact me at (207) 872-2771 or Creynolds@newdimensionsfcu.com to set an appointment.