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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.

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“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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Royalty Finance Provides The Key to Becoming The Master of Your Own Business Destiny

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The global pandemic has dealt yet another blow to business in general, and Small and Medium Enterprises (SMEs) in particular.

Even at the beginning of the year, the level of indebtedness across this community was untenable. To make matters worse, recent research has highlighted that a quarter of a million companies are at risk of collapsing under £35bn ($44bn) of unsustainable debt taken on during the COVID-19 pandemic. This is foreboding, to say the least.

However, the outlook need not all be doom and gloom. Alternative and more flexible forms of finance have been on the rise since the Global Financial Crisis sent shockwaves through the markets in 2008. Now, 12 years on, businesses have more options than ever before when it comes to finding an innovative capital solution which promotes, rather than encumbers, growth. Evaluating these will be essential for management teams as they look to stabilise their business in a post-pandemic world and create a stronger growth platform for 2021.

The biggest sector you have never heard of.

Royalty Finance is one such solution. It is probably one of the biggest sectors you have never heard of. Popularised in North America, this form of alternative financing is estimated to be worth around $50 billion in the region and has been recognised as a viable capital solution for companies operating across a range of sectors since the 1980s.

The solution sees well-established companies receive capital in return for a slice of their revenues.  Models vary, but typically royalty financing works as a type of ‘corporate mortgage’, where a business exchanges a small percentage of its revenues over a long period of time in return for capital today. It is because of its ability to provide supportive capital which does not saddle the business with re-financing risk that its relative obscurity in the UK and Europe is quickly changing.

The advantages are clear: because it is passive, unlike other options, royalty financing is the only source of capital which enables business owners to realize their long-term business goals without compromising owner control, adding amortizing bank debt to the business or, in most cases, diluting equity shares.

Since the royalty company is taking a slice of revenue from the business, it also means that the interest of the two partners are aligned (arguably, unlike other traditional finance methods), with the repayment percentage adjusted annually to reflect any movement in an investee’s revenues. This means that it represents a true partnership model.

As an additional benefit, the company’s repayments cover the principal as well as the interest. Many companies use the money to replace existing short-term debt to allow them to grow.  Royalty financing eliminates re-financing risk because it has a payback over decades, hence the analogy to a ‘corporate mortgage’. As well as being used to refinance debt, other common applications include M&A, shareholder restructuring and organic expansion.

A transatlantic shift

The transatlantic jump for royalty financing originally came as a result of a shift in how SMEs perceived and dealt with their banks on the back of the Global Financial Crisis. Just two years ago, the UK’s Federation of Small Business (FSB) reported that small credit business approvals had fallen to a 30-month low, with only 60% of small firms that applied for credit being successful, establishing a significant SME funding gap and frustrating growth.

Fast forward to today, and the coronavirus has shifted this sentiment stagnation a full 180o to the other extreme. The UK government’s decision to act as a guarantor for business loans to prop up the private sector during the pandemic, however well-meaning, has created a staggering debt mountain.  Worryingly, the implications for the SME sector, which employs 60% of the UK’s private sector workers, and its future growth prospects are even more eye-watering.

Banking industry executives fear that the loans will lead to widespread corporate failures in 2021 when companies must start paying interest on the debt, leading to a swathe of job losses. Even among businesses that can afford to service their loans, debt impedes a companies’ ability to invest and grow, thereby creating a significant drag on any economic revival after the Covid-19 pandemic.

The UK government has already started work on how to tackle the corporate debt mountain. A likely solution will be to enable the debt to be swapped by the government for equity stakes in businesses, much like we saw during the global financial crisis. This will make many of our SMEs accountable to UK Government, presenting an array of new potential headaches for management.

This raises the question: is this the only way? After the initial drop in revenue experienced by companies almost across the board in April 2020, when the pandemic first struck UK shores, many have started experiencing a relative upturn in trading. For those businesses which have a proven, long term track record of profitability, but have taken a hit during unprecedented times, there lies the opportunity to evaluate their options, refinance this debt and once again make themselves the masters of their own destiny.

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A new tomorrow

The accelerated adoption of pre-existing trends, whether it be flexible working or digitalisation, during the pandemic has been a hot topic over recent months. In my mind, this extends to the application of alternative finance as well.  In times of short-term uncertainty, long term capital, which does not need to be continuously repaid or have an identified exit strategy in place, represents a no-brainer for management teams.

The businesses of today benefit from a financial landscape that is more diverse than ever before. Now that the dust has settled following the initial shockwaves sent through the business community at the start of the outbreak, management teams have the perfect opportunity to take their future into their own hands and ensure that their capital structure works for, not against, their business.

With its aforementioned advantages and amid a quickly changing finance environment among SMEs in particular, royalty financing is set to grow from strength the strength across the UK and Europe. You could call its sudden rise a surprise, but all the right conditions have been there for growth of the industry.

Neil Johnson
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