5 Tips for Your Financial Resolutions
They say, "hindsight is 20/20," and this couldn't be truer in 2020, especially when it comes to finances! Though it's easy to sit back and reflect on your 2020 financial decisions now, it was near impossible to plan for what this year had in store. The best way to tackle what 2021 brings is to ensure you are mindful of your finances and have a plan in place that fits your needs. We've compiled our top five tips on building successful financial resolutions that will last throughout the new year and beyond.
Resolution Tip #1: Build a healthier budgeting plan
Having a strong understanding of where your money is allocated increases financial stability and helps you during emergencies. To help create a foundation, we recommend using a 50/30/20 budgeting plan. Allocate 50% of your after-tax income on things you need, such as housing and groceries, 30% on things you want, like dinners out and travel, and 20% towards savings and debt repayment. Plus, consider contacting us to see if you qualify for a debt consolidation loan.
Resolution Tip #2: Nurture an emergency fund
Our experts suggest having at least two months of expenses saved for an emergency fund. Determine how much money you would need to cover costs for those two months. Designate that as your "emergency fund goal." Once you've organized and categorized your debts, bills, and current expenses, you may find that you have extra funds to allocate towards that goal. Set up automatic payments into a separate savings account to make the transfers easy. Make sure to start saving as early as possible to take advantage of compound interest. Compound interest is interest earned in addition to the interest you already earn-it's free money!
Resolution Tip #3: Invest in a healthy financial future
Medically-related expenses can pop up when least expected. Being prepared financially can reduce stress when dealing with health issues. If your insurance qualifies as a High Deductible Plan, you may be eligible for a Health Savings Account (HSA). An HSA is tax-deductible, accrues interest, and allows tax-free withdrawals when you use it for qualified medical expenses. Maximum contributions have also increased in 2021. IRS guidelines state that maximum individual HSA contributions increased to $3,600 and $7,200 for family medical plans. Waldo State Bank proudly offers HSAs as an option for your financial planning needs and our financial experts are ready to help you start saving for medically-related expenses.
Alongside preparing for medically-related expenses, it is also never too early to plan for your retirement. A Traditional Individual Retirement Account (IRA) is another option to help invest in your future-learn the basics of IRAs in our blog! In 2021, IRS guidelines state you can contribute up to $6,000 annually until the age of 50 when you can contribute up to $7,000. Contact us for more information on IRA options that will suit your retirement goals.
Resolution Tip #4: Organize your savings plan
While budgeting, emergency funds, HSAs, and IRAs are all great ways to be financially prepared, there are different ways to keep your savings in check. Looking at your list of expenses, can you identify where you can shave off a dollar or two? Maybe changing out cell phone providers can help you save more every month. Do you still pay for subscriptions that you no longer need? Subscriptions could include mobile app subscriptions, magazine subscriptions, or even monthly knick-knacks that pile up. Are you interested in making next Christmas a little easier financially or saving for that dream vacation? We have specific savings accounts that can help you accomplish this. With our Christmas Club and Vacation Club accounts, you can make regular deposits throughout the year, and a check will be sent to you in time for Christmas shopping or summer vacation! For more detailed ideas on how to save, check out our blog "5 Steps to Increasing your Savings."
Resolution Tip #5: Supporting local businesses
As a part of maintaining financial fitness throughout the New Year, investing in locally owned businesses stimulates the local economy and your pocket. The money you spend at local businesses stays in your community, as these businesses create jobs, donate to charities and non-profits, and reinvest in the community more than large corporations. Small companies also offer personalized customer service that you may not get from bigger chain stores. If an issue arises, it could cost you time, money, and energy trying to remedy the situation from a big-box company instead of saving.