Katia Chesnok is a Latina money expert and coach, and the founder and content creator of Economikat, an educational platform for personal finance. She teaches Latinx on all things money and empowers them to earn more, save more, do sideline jobs, and invest to build wealth.
The year 2020 was marked by the beginning of the pandemic and the toll it took not only for our health and well-being, but also for our finances. Many of us struggled with job losses or lower wages as a result of the pandemic last year, and while it’s overwhelming and scary, there are things you can do to help yourself. So as we set our intentions for 2021, let us reflect on the lessons we learned in 2020. Let’s ask ourselves the following questions: How can we improve the way we manage our finances? Are we prepared for emergencies? Are we only dependent on our salary of 9 to 5 or do we have different sources of income? Are we investing for our retirement or are we living within our means?
If you are thinking about your own finances, here are some specific financial goals to start this year 2021 to better prepare yourself for what lies ahead.
Save your emergency money
2020 has shown us the importance of being prepared for emergencies, considering the impact and economic consequences of the pandemic. Our emergency fund is the basis for our financial well-being. This is why it is so important to save 3 to 6 months of money to cover all of our monthly expenses. These funds should only be used for emergencies.
One way to save our emergency funds is to cut our monthly expenses. But how can we keep track of our expenses? By creating a budget that tells us our income and expenses every month. A budget can be created manually with pen and paper or digitally with a budgeting app like Mint and You Need a Budget. Once we have a budget, we can determine which expenses we could cut or which memberships we could cancel.
One way to start saving our emergency fund is to automate our savings. One of the biggest challenges in saving money is remembering it. This process automatically transfers the money from the check to the savings account weekly or monthly.
Reduce unnecessary costs and identify your wishes based on your needs. Start saving by cooking at home as much as possible. This is how you can save so much money per month! All of those little expenses add up … yes, you can have a nice off-Sunday brunch or your favorite latte in an afternoon – but if you’re financially troubled now and can’t save anything, try cutting it down to once every 2 weeks. As you use more coupons when shopping for groceries, buy generic unbranded groceries and always shop with a list to avoid temptation.
Negotiate or get this side concert going
Not only can we live within our means, but we can also try to earn more money by doing secondary jobs. So find out about the part-time jobs currently in demand that match your skills. Think about something you’ve always wanted to do, maybe you haven’t had the time or something that you are passionate about. Perhaps you can monetize this hobby or side project by starting a blog, for example. There are currently many secondary jobs in demand, e.g. B. Delivery jobs, online tutors, virtual assistants, grocery store jobs, and digital marketers.
Also, try to negotiate your salary if you are currently employed. But before doing so make sure that you: Know your specific successes in the company and how they can explain to your boss that the timing is right to speak to your boss and also research your current salary range on the market websites like Glassdoor and Payscale.
Pay off credit card debt and student loans and improve your credit score
If you currently have debts, especially credit card debt, first organize all of your records and know how much you owe. Stop using the credit cards if you can and at least use cash until you have paid the debt. Have open communication with your creditors such as your student loan providers and banks.
There are two popular payment methods for debt: the Snowball method and avalanche method. The snowball method is when we first pay out credit cards with the lowest balance and then those with the highest balance. While the avalanche method focuses on paying the credit card or debts with the highest interest rate first, while paying the minimums for all other cards.
Paying off your debts as quickly as possible, especially your credit cards, has a positive effect on your creditworthiness. Your credit will improve if you pay your cards on time, if you keep your oldest cards open even after you pay, and if you use less than 30% of the card credit limit. Also, be sure to check your credit report at least every 6 months to see if there is any suspicious activity or errors.
Invest to build wealth and retire
If one of your financial goals for 2021 is to start investing, the first thing to do is to make sure that you have preferably stored your emergency funds in a country HYSA (High Yield Savings Account). A HYSA is a savings account that pays you a higher interest rate than a normal savings account. So this is a basic risk-free way to grow your money. Now the interest rates are lower than usual at around 0.50%, but still much higher than a traditional savings account – that usually pays 0.01%.
The first thing you need to do if we are ready to start investing is to check with your employer to see if you qualify for a 401k – an employer-sponsored retirement plan. If you don’t qualify or work independently, consider opening a Roth IRA or an IRA (Individual Retirement Account). The biggest difference between a Roth IRA and a traditional IRA is when you get a tax break. With a traditional IRA, the contributions are now tax deductible, but withdrawals made during our retirement are taxable. But with the Roth IRA, contributions are now not tax-deductible, but the withdrawals are tax-free during our retirement. IRA contributions can also be withdrawn at any time with the Roth.
Before you start investing, you should understand the terminology of investing as well as you can. I like places like Investopedia and Yahoo Finance to learn and research as much as possible about this topic so you can make informed decisions. We know vocabulary can be overwhelming, but start small and look at The Balance’s breakdown for words like “Bond” and “Common Stock” Become part of your everyday life.
Learn a new skill in 2021
If one of your goals is to learn a new skill this new year, you need to invest time and energy in yourself. How can you do that If you are reading more, take part in seminars, workshops or courses on topics in which you are interested. The best investment you can make is expanding your skills so you can have more to offer.
There are many sources online that can teach us, for free or inexpensively, new skills that a traditional college would charge us, like Coursera and Khan Academy. By learning a new skill, we open up new opportunities for promotions, etc. in our current job, or we can even start a new part-time or part-time job with the new skill we are learning. Also, surround yourself with someone who already knows the skills you want to learn or find a mentor if necessary.
The way we manage our personal finances is influenced by the way we think. even more than our actual numbers. In my opinion, finance is 80% mindset and 20% math. Why? Because the right attitude is so important if we want to feel financially secure. A scarcity mindset is an invisible blanket that limits our dreams and tells us that there is nothing we can do before we even try to begin. Instead of saying, “I don’t have any money now,” make a habit of saying, for example, “How can I make more money now?”
The pandemic has put our stability and general wellbeing to the test, but 2020 has also taught us what is really important: saving, investing, and multiple sources of income. In addition to patience, consistency and focusing on our “why”, this helps us to achieve our financial goals for 2021.
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