14 Tips To Meet Your Financial Goals In 2021

Who among us isn’t ready to bid good riddance to the year 2020? The pandemic has upended life across the globe and that includes creating financial chaos and stress for people of all walks of life. The good news is that 2021 is just around the corner. The bad news is that there will be pandemic fallout to deal with in the year ahead, and that could mean a continued rocky ride for your personal finances.

That doesn’t mean postponing or eliminating financial plans and goals altogether. And it doesn’t mean 2021 will be a bust. Instead, you’ll need to be more focused, savvy, and strategic about money goals in the coming year, which is why we asked financial experts across the country to weigh in and provide tips and insights about how to prosper financially in 2021 despite all the uncertainties that lie ahead.

Related: 19 Smart Ways to Get Through a Recession

Create a Rolling Budget

In times of uncertainty, it’s a good idea to create what’s known as a rolling budget, which is a budget that’s dynamic and changes throughout the year. This type of budget typically focuses on the near term, rather than the long term.

“You can’t always foresee every stumbling block in your financial future, so make sure to keep your budget bendable, not only judging the numbers you see at the moment but also make room for the surprises,” says Roy Ferman, founder and CEO of Seek Capital. “Keep a rolling budget and forecast that accounts for potential fluctuations — positive or negative.”

In other words, budget in a way that accounts for multiple real-world scenarios, says Ferman, creating a plan A, B, C, and possibly even D. “You want each plan fully mapped out as if it was plan A to keep you on top of any discrepancies. Allow yourself to come up with different variations, and allocate for those variations.”

Establish More Than One Stream of Income

Depending on how you define the data, anywhere from 20 million to 30 million people were unemployed or had their income affected by the pandemic, says Marco Sison, financial coach for Nomadic FIRE. To help protect yourself against the impacts of unemployment or reduced income, it’s a good idea to establish multiple streams of income.

“If one job or income stream is cut off, you still have other sources coming in to live off of,” says Sison. “Ideally, these income streams are passive: dividends, rental property, digital side businesses. If your hours get cut, or you lose your job, you can reduce your expenses and live off your side hustles without tapping your emergency fund.”

Budget for Saving

Warren Buffett has been quoted as saying “If you want to make saving a priority, take a look at how you budget. Do not save what is left after spending; instead spend what is left after saving.”

If you truly want to make saving a priority, particularly amid challenging economic times, you cannot plan to simply set aside what is left over, says Robert Johnson, a professor of finance, at Creighton University’s Heider College of Business. “You don’t successfully build wealth by simply taking what you have left after all your expenses,” says Johnson. “We accomplish what we prioritize. Prioritize savings and invest those savings. Saving should be a line item on your budget.”

Develop an Investment Policy Statement

Anyone who makes investments should create what’s called an investment policy statement (IPS) and follow it, says Johnson at Creighton University. “An IPS is a written document that clearly sets out an investor’s return objectives and risk tolerance over that investor’s relevant time horizon, along with applicable constraints such as liquidity needs and tax circumstances,” explains Johnson. “The whole point of an IPS is to guide you through changing market conditions. It should not be changed as a result of market fluctuations.”

Avoid Credit-Card Debt

Credit-card debt is a slippery slope in the best of times. And when the economy is uncertain, it’s best to avoid using credit cards as much as possible. “It’s never advised to spend money you don’t have via revolving lines of credit. And psychologically making purchases via most credit cards makes us a lot less frugal and undisciplined,” says Adem Selita, CEO and co-founder of The Debt Relief Company. “Considering that interest rates are near all-time lows, paying 20% or more on credit-card debt is a terrible financial decision to make.”

Clear Outstanding Debts

One more note about credit-card debt, if you’re able: Wipe out all existing debt. That will be the biggest favor you can do yourself in terms of meeting financial goals in 2021 and laying the groundwork for success (and beyond), says David Meltzer of East Insurance Group. “Chip off your debt bit by bit by paying off a small portion each month,” says Meltzer. “And do some belt-tightening on your spending for the time being. Take a look at your expenses and see which ones you can let go, and which ones you need to minimize, in order to help clear debt.”

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Streamline Your Budget

Study your cash flow, both your income and expenses and outline a realistic household budget, says Meltzer at East Insurance Group. “Your expenses should be exclusively necessities like house bills, groceries, food, mortgage, insurance, and savings,” says Meltzer. “There’s no room for gym memberships and Netflix subscriptions on a tight budget. Most importantly, keep track of your spending. At this point, each cent counts.”

Consider Living Below Your Means

While you’re busy outlining your month-to-month budget goals for 2021 and paring back your spending, you might consider establishing a plan to live well below your means.

“By spending less than you earn, you open up funds to put into a savings account for emergency situations, such as a pandemic, or the loss of a job,” says Mason Miranda, credit industry specialist for Credit Card Insider. “The more you save now, the more financially stable you’ll be later when a crisis hits. Depending on your goals and how much you can save, you could even avoid going into debt and pay for large purchases in cash.”

Prioritize Your Goals and Be Realistic

Prioritizing all of your financial goals allows you to put them into specific categories based on which goals you want to meet first, says George Birrell, CPA and founder of TaxHub. You’ll also want to set a realistic time frame for meeting those goals amid the uncertain economic landscape.

“Setting a realistic timeframe is very important,” says Birrell. “If you set a timeline for one year, but your expenses don’t allow for meeting that timeline or you don’t have the capacity to put in extra work to earn more, you’re not going to reach that goal. Look at it objectively and realistically.”

Set Milestones Toward Larger Goals

Think of a milestone as a smaller goal that helps you get to your larger goal, says entrepreneur Thierry Tremblay, CEO founder of the online database software company Kohezion.

“They are like guideposts on the trail — smaller tasks that you can do to help you stay in line with your overall goal,” says Tremblay. If you fail at various points along the way when pursuing financial goals, think of it as an opportunity to gain valuable insights about things that work and don’t work, says Tremblay. “When you move on to the next goal you’re trying to accomplish, you have an advantage because of the things you’ve learned from your failure,” adds Tremblay.

Start With What You Have

Financial advisers often recommended setting aside three to six months’ worth of income in an emergency fund, which can seem overwhelming if you’re living paycheck to paycheck as many are right now, says Emma Healey, family finance and budgeting expert and founder at Mum’s Money. Rather than giving up on establishing an emergency savings altogether in 2021, simply start smaller.

“Start with what you have. Even if you can only spare $5 a week, stashing it aside to help pad out your budget when times are tough,” says Healey. “It is a decision you’ll never regret. Add more as you can, but the most important thing is to start.”

Automate Your Savings, Debt, and Bill Payments

It’s hard to spend money if you’ve already sent it somewhere else, says Chelsie Moore, CFA and director, wealth management and financial planning for Country Financial. Create automatic debt payments, bill payments and automatic transfers from your checking account to your savings account.

“A little bit adds up over time,” says Moore. “Automatic payments may help you avoid late payment penalties, which are a waste of money, and automatic savings can add up without effort or feelings of sacrifice.”

Meeting your financial goals in the best of times can often be challenging. But when the world is topsy-turvy it can be even more perplexing trying to figure out how to accomplish your goals once you’ve defined them. A personal finance professional can help you navigate the uncertainty and plot a path to success.

“Seek the advice and guidance of a financial professional who has the expertise to assist you,” says Tracey Bissett, CFA and president of Bissett Financial Fitness. “The best way to find one is to seek recommendations from someone you trust and then interview potential advisors to find the best fit. You should feel comfortable talking to the professional and asking them questions.”

Be Kind to Yourself

It’s important to remember as you embark upon 2021, and any year for that matter, that financial fitness is a lifelong journey. “Take small, imperfect actions daily to increase your financial knowledge and movement towards your goals. If you make a misstep, be kind to yourself and get back on track,” says Bissett.

By: Mia Taylor

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Your Financial Year-End Checklist

2020 is over, and for many of you, it can’t end soon enough. There will be plenty of time to celebrate the end of one year and to hope for better days in the one ahead. But before we get to that, take these steps to get financially ready for 2021.

1) Review your goals: The end of the year is a great time to review the goals you made at the beginning of the year and set new ones for 2021. How did you do this year? Is there anything you’re proud of accomplishing? I like to start with bright spots because they can guide you toward success as you set new goals. But let’s be realistic, too; 2020 threw us a lot of curveballs.

Was there anything you wish you could have done better? You can also learn from any potential stumbling blocks and figure out how to use them as stepping-stones next year. You may also want to take time now to review your net worth. That’s one way to gauge the progress you’ve made in your financial health this year.

2) Update your budget: Did you save the money that you wanted to? Pay off the debt that you needed to? The end of the year gives you a solid end point to assess whether met the goals you set at the outset of 2020. What if you didn’t have a budget or financial goals? You’ve got a blank slate ahead. Why not create a budget that works? 

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3) Create a holiday bucket: Holidays can be budget breakers, so why not incorporate them into your spending goals right from the start? Christmas may look a lot different this year. But you can still create a separate bucket for holiday spending and when that money is gone, stop spending. You’ll thank yourself in January when you don’t have an unusually large credit card bill.

4) Use it or lose it: Some of your benefits—like vacation days or a medical or dependent care flexible spending account (FSA)—expire at the end of the year. Take stock of what you have left and use these benefits to your advantage. MORE FOR YOUPPP Loan Forgiveness Application Guidance For The Self-Employed, Freelancers And ContractorsSBA Approving Economic Injury Disaster Loans (EIDLs): What You Need To KnowWhat You Can Do Now To Maximize Paycheck Protection Loan Forgiveness

5) Make any last charitable contributions: December 31st is the last day your charitable contributions can be deducted on your 2020 tax return. If giving to charity is a part of your spending plan, you can use these questions to help make the most of your charitable giving.

6) Pump up your 529: Just like charitable contributions, contributions to your 529 college savings plan must be made by December 31st to count for this tax year. Find out if your state is one of over 30 that allow you to deduct your contribution. You can find the specific deduction here. If your state is one of the four that allow an unlimited deduction, keep in mind the yearly gift-tax and super-funding rules.

7) Max out your 401k: While you have until April to make contributions to your traditional IRA, Roth IRA and HSA, you can only contribute to your 401k through December 31st. So, if you have extra cash and are looking to boost your savings, consider contributing your last couple of checks entirely to your 401k. Business owners can do the same with the employee portion of your Solo 401k contributions.

8) Find your tax return: You’ll be doing your taxes before you know it, so use this time to get prepared. Review last year’s return and make a mental list of records you’ll need to assemble. Year-end is also a good time to decide whether a Roth conversion makes sense for you.

9) Review your business structure: Evaluate your business structure and the QBI deduction to identify any changes you need to make to your business. You might want to set up a solo 401k, for instance, and if so, you’ll have to act before December 31st (although you can make employer/profit sharing contributions up to the business tax filing deadline).

10) Defer income and incur expenses: If you’re a business owner, you may also want to look at ways to defer income into 2021 or pay for business expenses you anticipate for early next year. This is any easy way to reduce your tax liability for 2020. However, remember not to spend money on business expenses that you wouldn’t otherwise incur just for a tax deduction. Spending a $1 to save 24 cents still costs you 76 cents.

 11) Will and trust review: The end of the year is a good time to take stock of changes in your life—like getting married or divorced, having children, starting a business or retiring.  Your estate plan should reflect these changes. Get out your will, documentation for trusts you’ve established and powers of attorney and make sure they match your current situation.

12) Insurance documents: Insurance documents also need to cover your current situation. Take a look at your life and disability insurance policies to make sure they protect your current income and those dependent on it. Your renters or homeowners insurance should cover any additional big purchases you made during the year. And lastly, you should review your health insurance policy for any upcoming changes for 2020. For those of you enrolling in the Market Place, you have until December 15th to pick your plan.

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My last bonus task is to enjoy this holiday season. I love the holidays because you can reflect and appreciate what you have. We’ve been tested a lot this year, living our lives through a pandemic, racial unrest and a contentious election. I hope the end of the year brings you comfort and peace. Follow me on Twitter or LinkedIn. Check out my website

Brian Thompson

Brian Thompson

As both a tax attorney and a CERTIFIED FINANCIAL PLANNER™, I provide comprehensive financial planning to LGBTQ entrepreneurs who run mission-driven businesses. I hold a special place in my heart for small-business owners. I spent a decade defending them against the IRS as a tax attorney and have become one as a financial advisor. It’s a position filled with hope and opportunity. It gives you the most flexibility to create the life that you want. I also understand the added stresses of running a business while being a person of color and a part of the LGBTQ community. You may feel like you don’t have access to the knowledge that others do. I’m here to help lift some of that weight from your shoulders.

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Critics:

A personal budget or home budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment. Past spending and personal debt are considered when creating a personal budget. There are several methods and tools available for creating, using and adjusting a personal budget. For example, jobs are an income source, while bills and rent payments are expenses.

Contents

How To Budget In Uncertain Times

It’s that time of the year again… time to create next year’s budget. Budgeting in the best of times is difficult, and now it’s even more tricky with the uncertainty of the pandemic, and more. It’s time to take a new approach. 

So before you dive too deeply into the budget tar pit, here are my key takeaways from discussions with my executive coaching clients: 

1.Rethink Budgeting To Focus On Outcomes. Why do we budget? The same reason we do any type of planning—it’s an attempt to control, predict, effectively allocate resources, maximize growth, profits and earnings per share, ensure stability and certainty. Yet in today’s world of relentless and rapid change, we must be nimble, a collective (no more silo-ing departments and then punishing poor performers that usually have performance problems due to failed dependencies/contingencies with other departments!) And have you noticed that things always change? And then, the vast majority of the time, the plan does too. But in today’s new world are we measuring the most impactful outcomes? Here’s what our most financially and culturally effective clients are considering as updated outcomes they want to see in a healthy business:   

a.Customer experience and engagement 

b.Employee experience and engagement (this include cross-functional, inter-departmental effectiveness and collaboration) 

c. Ecosystem experience and engagement (your strategic partners, resellers, other partnerships are here) 

d. Sustained profitable growth (we’re ensuring we don’t rest on our laurels here) 

e. Sustained profitable operational effectiveness (we’re watching expenses here) 

f. Sustained innovation (we’re keeping our competitive edge here) 

g. Departmental and organizational Key Performance Indicators (KPIs) to keep everyone focused 

… all of which help us to predict the ultimately unpredictable, because people are creating the results anyway. That’s why we measure their outcomes first. 

2. Set Strategic Guidelines For Financial Focus. Like Core Values, which help us make behavioral decisions in the heat of battle, Strategic Guidelines help us make effective decisions when the grenades are flying, when the rug has been pulled out from under us, when supply chains have dried up, when currencies have crashed, when competitors have blindsided us, when the calamity of the day has occurred. When we focus on Strategic Guidelines (which you’ll draw from the bulleted list in item #1 above), we will be better equipped to allocate financial resources in line with what we need to achieve as an organization. Then we’ll be more likely to consider cross-functional dependencies and contingencies and create effective (and not siloed) departmental budgets.

Doing an outcome frame for each objective in item #1 above will help you ask the most appropriate questions to uncover what the priorities are, the appropriate allocation, what the business needs versus what is sexy/compelling/a bright shiny object, and more. Here are the outcome frame questions: 

· What would we like? (tangible outcome we can create and maintain) 

What will having that do for us? (specific benefits and how we’ll feel, how our key constituents will benefit) 

·  How will we know when we have it? (specific measurable proof) 

·   What of value might we risk/lose in order to get it? (what is the “cost” of getting the outcome we want? What side effects may occur?) 

·      When, where, with whom would we like this outcome? (time, context, key players) 

·      What are our next steps? (key planning steps here) 

The Outcome Frame sheds light on what will truly move the needle  for our business. It helps my clients see into their pet projects, their assumptions, the costs, and they make much better decisions  and avoid caving to unconscious bias too. For example a few years ago I was helping a client with their annual planning. They had a distribution partnership with an enormous Big Box retailer that, although impressive on their web site, was high maintenance and very low profit. It was clear that the business would be better off without this partnership, so after some agonizing they terminated it. This led to my client having the time/energy to secure 2 new partnerships that were far less work and far more profitable. The Outcome Frame exposed this. 

The Net-Net 

·      Create budgets based on the outcomes you want—they’ll be more likely to be achieved 

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·      Ensure all departments are aligned with the overall strategic guidelines so everyone is “in it together”—it’s “our” overall budget, not coveted by a certain department 

·      Learn to love change and to zoom out to track how the business is doing at a high level, then zoom in to the details 

How’s your budgeting going? Follow me on Twitter. Check out my website.

Christine Comaford

I’ve lived many lives: serial entrepreneur, technology and CEO advisor, venture capitalist, engineer in the early days of Microsoft. Today I help CEOs in rapid growth and turnaround scenarios to achieve previously unheard of results through seeing into their blind spots, aligning their team and board, changing challenging behaviors, increasing team accountability and execution. Some call me a business strategist, some call me an executive coach.

 Christine Comaford

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Critics: 

Budgeting is the process of creating a plan to spend your money. This spending plan is called a budget. Creating this spending plan allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do. Budgeting is simply balancing your expenses with your income.
Performance Based Budgeting  attempts to solve decision making problems based on a programs ability  to convert inputs to outputs and/or use inputs to affect certain  outcomes. whatever Performance may be judged by a certain program's  ability to meet certain objectives that contribute to a more abstract  goal as calculated by that program's ability to use resources (or  inputs) efficiently—by linking inputs to outputs—and/or effectively—by  linking inputs to outcomes. A decision making—or allocation of scarce  resources—problem is solved by determining which project maximizes  efficiency and efficacy.

 Zero-based budgeting  is a response to an incremental decision making process whereby the  budget of a given fiscal year (FY) is largely decided upon by the  existing budget of FY-1. In contrast to incrementalism,  the allocation of scarce resources—funding—is determined from a  zero-sum accounting method. In government, each function of a  department's section proposes certain objectives that relate to some  goal the section could achieve if allocated x dollars.
 Flexible Freeze is a budgeting approach pioneered by  President George H. W. Bush as a means to cut government spending. Under  this approach, certain programs would be affected by changes in  population growth and inflation.

 Program Assessment Rating Tool (P.A.R.T.)  is an instrument developed by the United States OMB to measure and  assess the effectiveness of federal programs that review the program’s  purpose and design, strategic planning, program management, and program  results and accountability. The scores are rated from effective (ranging  between 85 and 100 points), moderately affective (70-84 points),  adequate (50-69 points), and ineffective (0-49 points).

 Priority Based Budgeting is a response to poor economic  conditions.  As opposed to incremental budgeting, where resource  allocation is determined based on marginal shifts in costs, priority  based budgeting fixes the amount of governmental resources and then  allocates resources across the various programs.  The programs receive  their allocation based on their priority; priorities may include safe  and secure communities, health, education, and community development  among others.  Outcome assessment then determines the efficacy of the  programs.  Although this approach is pro-democratic, critics suggest the  administration of this process is extremely difficult.
See also
Budget
 Budget process
 Budget theory
 Constitutional economics
 Political economy
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8 Numbers That Sum Up The Financial Crisis Facing State And Local Governments

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As the coronavirus crisis continues to force business closures and layoffs across the country, state and local finances are stretched to the limit. The cost of healthcare and public services is soaring as states attempt to contain the virus. Meanwhile, tax revenues are plummeting as jobs disappear and spending slows.

Here are eight numbers that sum up the crisis.

$555 billion

That’s the combined budget shortfall that states are projected to face through 2022, according to the Center on Budget and Policy Priorities.

90%

That’s the percentage of cities that say it will be more difficult to meet the financial needs of their communities in fiscal year 2021 compared to the prior, according to a new report from the National League of Cities.

65%

That’s the portion of cities that delayed capital expenditures or infrastructure projects in June, according to the NLC.

1.2 million

That’s how many local government jobs have been lost since pandemic hit the United States in February, according to data from the Bureau of Labor Statistics.

$100

That’s the weekly payment states were initially asked to contribute to President Trump’s proposed federal unemployment supplement. States immediately balked at the plan, with many refusing to commit or saying their budgets were already stretched too thin. New guidance this week clarified that states won’t have to chip in, after all, to be eligible to pay out a federal $300 benefit through the new program.

$9.9 billion

That’s how much New Jersey can borrow to cover the budget shortfalls created by the coronavirus crisis, according to a New Jersey Supreme Court decision. Hawaii and Illinois have also considered loans to fill budget gaps.

$150 billion

That’s the amount of federal aid the Cares Act, signed into law in March by President Trump, provided for state and local governments.

$1 trillion

That’s how much additional aid Democrats allotted for state and local governments in the Heroes Act, the $3+ trillion aid package they passed in May. Republicans, on the other hand, didn’t include any additional state aid in their proposal. This issue has been a major sticking point in negotiations over the next bill. So far, top Democrats and the Trump Administration have not been able to reach an agreement.

Follow me on Twitter. Send me a secure tip.

I’m a breaking news reporter for Forbes focusing on economic policy and capital markets. I completed my master’s degree in business and economic reporting at New York University. Before becoming a journalist, I worked as a paralegal specializing in corporate compliance.

Source: Forbes

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