Start the countdown: A new year is fast approaching. So now is the time to hatch a plan to get your personal finances back on track. Think of 2021 as a fresh start to solve your money worries.
Here are 5 tips – or must-do “money” resolutions for the New Year– to help you trim your debt in 2021.
Since most people need a substantial amount of money set aside to help ride out an unexpected financial setback, we’ll kick off this list of advice with some money-saving tips recommended by financial planners and advisors:
► Cut back on spending
Just like slimming down your waist size is good for your health, trimming the fat in your monthly budget is a good way to bolster the health of your emergency fund. (Your goal? Build up six months of living expenses.)
But like a diet, this takes discipline.
“Review every expense that you have and ask yourself, ‘Can I eliminate or reduce some of my expenses,’ ” says Philip Palumbo, founder and CEO of Palumbo Wealth Management. His pet spending peeve: dining out or ordering in. “It can add up quickly,” he says.
► Rid yourself of ‘recurring’ charges
Scrutinize your credit card statement and identify and cancel any “recurring charges” for services you no longer use, such as magazine or video streaming subscriptions or weight-loss programs, says Cathy Curtis, founder and CEO of Curtis Financial Planning.
► Adjust your paycheck withholding
If you regularly get a tax refund from the IRS, that’s better than owing. But it also means you’re having too much of your pay withheld from your paycheck to cover your tax burden. You can increase your cash flow by adjusting your tax withholding to ensure that you’re not having more taken out of each check for taxes than necessary, says Michael DiNuzzo, a financial advisor at DiNuzzo Wealth Management.
► Save anywhere you can
Every quarter or dollar or $20 you can save, no matter where you can find the savings, can add up fast, says Cynthia Pruemm, founder and CEO of SIS Financial Group. Consider enrolling in a program like Acorns, which sweeps your spare change on debit or credit card transactions into a savings account. Or save on shopping by making your purchases on online sites like Rakuten and Ibotta, which give you refunds for shopping at their sites. You can also spend less by replacing a pricey cable TV service for a cheaper streaming service like Roku, Pruemm says. “Saving money each month can be easier than you think,” she says.
► Refinance your home
If you haven’t taken advantage of record-low mortgage rates, consider refinancing your home loan to a lower rate, says Ryan Graham, senior financial advisor at Altfest Personal Wealth Management. “Even a 1% reduction in your interest rate can result in very material interest savings over the life of your mortgage,” he says. A $250,000, 30-year-fixed home loan at 4.25% will cost you $1,230 in principal and interest each month. But you’ll pay just $1,088 per month, saving $142 per payment, if you refinance to a 30-year loan at 3.25%.
Written By: Adam Shell