Can we be honest for a second? 2020 was a complete dumpster fire.
What started out with everyone chanting “This will be my decade,” and “I got my 20/20 vision,” quickly turned into I can't wait for 2020 to be over before summer even hit!
Not to dwell in the past, but between the social unrest, the WORLDWIDE PANDEMIC, a toxic political year… raise your hand if your with me when I say, “Bring on 2021!”
In fact, there is an upside to 2020… chances are you will never experience a year like this again – and that is a good thing for everyone. And while 2020 may have been a bad year in many regards, there were a lot of great lessons to take from the year such as:
- Family units became closer to one another
- We began to put things into perspective
- We realized that perhaps the hustle and bustle commute lifestyle isn't so glamorous
- Thank you for video conferencing
- We actually have a lot to be grateful for like our health
- Lastly, if you had money problems, you most likely had a serious wake up call
That last point leads me to this article you're reading right now, the fun topic of money. Today, I will share with you my personal take on what some of the best money tips are for the year 2021!
The Best Money Tips You Need For 2021
1. Time to take debt seriously.
2020 happened to be there year we finally paid off the last $1 of our once $300,000 in student loans. This is why I still think the best money tip (and in some cases a mental health tip) is this:
Get Debt Free.
While the trendy thing to do is to invest and saving for your dream home is a good idea, the truth of the matter is that getting debt free helps you in every area. Paying off debt will allow you to:
- Have more money to save and invest
- Help give you the feeling of control
- Ease some financial stress
- Enjoy life
Paying off debt has the ability to restore financial confidence by notching you some quick wins, help you fix your credit, and better your debt to income ratio. Aside from that, paying off your debt will offer you liquidity!
Perhaps the biggest take away from 2020, especially for those who felt the financial pressure, was that owing money made everything that much harder. When things are well, debt doesn't seem so bad.
However, when there is a money squeeze, debt becomes very problematic. So set a goal this year to pay off some debt. Start small and use these debt payoff tips here!
2. Fatten up your emergency fund.
Graduating in 2009 is perhaps the single best thing that has ever happened to me. Why?
I will never forget how hard it was to get a job, find work, and to make money. Unfortunately, by about 2014, most people had 2009 in the rearview mirror… that was until 2020 hit.
While some were shocked, there were plenty of experts who predicted an economic downturn (It's not a matter of if, it is always just a matter of when), they just never could have guessed the reason.
Either way, those who had an emergency fund felt better knowing they had a backup plan compared to those who didn't. That means if you don't have an emergency fund, create one and if you do already, consider growing it in 2021.
Aim to save one month of expenses, then three, and finally at least six! Our personal goal for 2021 is to reach one year in a savings account!
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3. Remember health is wealth.
One thing that personally got me through 2020 was the focus on my health.
My wife and I have always valued our health, but for some odd reason we stepped it up in 2020. And when the Pandemic hit, we looked at it as an opportunity to put more effort and time into fitness.
The result? We felt great.
Aside from the clear physical benefits of regular exercise and better eating habits, there are mental health and even financial aspects to focusing on your health.
One of the most underrated money tips is the focus on your health! Healthier people are more likely to:
- Visit the doctors less (saves money)
- Live longer
- Be more productive (think more opportunities to make money)
- Have better relationships and mental health
So when you're thinking about all the Christmas sales this year, consider giving yourself the gift of health as we head into 2021.
4. Pay yourself first
You have most likely heard of the financial concept that says pay yourself first. If you haven't really pay attention to this one, it is hands down the best money tip out there!
Here is why you need to pay yourself first:
- You work 40 hours a week, some of that needs to go to your future (see real hourly wage concept)
- The point of working isn't to just pay bills but to have something leftover
- It is automatic and simple once you start
Now you know why you should pay yourself first, here is how to do just that:
- Figure out how much you bring home each month
- Add up your bills (fixed expenses) and your necessary variable spending (food, pets, etc)
- Subtract your necessary spending and bills total from your net monthly income
- That number is your surplus or net cash flow
- Decided how much of that number you want to use to pay yourself first (either pay off debt, invest, save)
- Spend after you pay yourself
For example, if your household brings in $5,000 per month with expenses at $3,000, this means you have a surplus of $2,000. If you decide to pay yourself $1,000 and spend $1,000, you would pay yourself $250 each week!
Tip: Automate it.
Every two weeks I get paid. Every two weeks, a percentage of my income goes to my retirement account, while another amount goes right to our emergency fund.
Simply setup reoccurring deposits into your savings account, brokerage fund, or retirement account on the day you get paid. Some reoccurring transfer options allow you to “Grow it” by 1% each month.
5. Be smart investor, not a cool one.
Telling all your friends you're an investor because you downloaded the Robinhood app doesn't make you an investor, even if you feel like it does.
Now bear with me for a second, don't shoot the messenger. The truth is this when it comes to investing in the stock market: 90% lose money. To spell it out another way for you, if you line up 10 people with an investing app, only one is going to make it out with profit.
Keep in mind, this doesn't make investing a horrible idea nor am I saying you can't be successful, but the goal is to invest smart, not to sound cool when you're at a social gathering.
Instead of trying your hand with individual stocks (which take time, expertise, background knowledge, patience, and lot's of risk), consider one of the more safe investment strategies:
Max out your retirement accounts.
You don't have to be a master investor to max out your 401K, IRA, or another retirement fund. Keep in mind that retirement saving is investing, and you can typically earn a match from your employer.
Set a goal in 2021 to max out your retirement savings.
Use Dollar cost averaging
Instead of timing the markets, trying to play the stocks, and focusing on short term gains, consider dollar-cost averaging.
Simply determine how much money you're willing to invest each month – regardless of the market – and contribute it monthly to your investing account, like a Vanguard brokerage account.
Overtime, history shows you will always come out on top using this method.
Never invest what you're not willing to lose
The key to investing is not being an emotional investor. This means you need to be comfortable and willing to lose it if you plan on investing in the stock market. Remember, 90% of investors lose money.
So don't invest what you're not cool with potentially losing.
6. Create multiple streams of income.
Focusing on growing income streams starting in 2016 proved to be a breath of fresh air in 2020 when stuff hit the fan.
Owning a small digital marketing company and starting this blog helped provide supplemental income each month that was used for saving, debt, and some travel. That means in 2021, consider looking at creating multiple streams of income!
- Max our retirement accounts
- Use the index fund advice from above
- Look at starting some sort of online company like a blog/website (see here for ideas)
- Focus on a hobby that can make you money
- Just start something and see where it goes
- Or, you can always just advertise with your car.
Asking for a raise is not a bad idea, but coming out of 2020, you might want to hold off and just be grateful you have a job!
However, what you can consider doing if you work from home is looking for another easy online job. People who work from home and can manage their time well have been known to do two jobs at once!
7. Get your taxes in order
Want to get a huge tax refund this year? Who doesnt.
Start 2021 off on top by getting all your ducks in a row when it comes to your taxes. This means looking into the tax code about the possibility of your home office (pending congress approval) write-off, but also getting everything prepared and ready to go.
Be on top of your taxes so you can get taxes out of the way as soon as possible!
8. Don't compare yourself
When you compare yourself financially, the only person that loses is you.
This might sound blunt, but it's true, you can't constantly try to keep up with everyone else or you will ultimately sacrifice your own happiness. Not to mention, if you compare yourself, you will never hit your financial goals.
Case in point, millennials.
Millennials are saddled down with student loan debt, right? Yes and no. In fact, millennials are more burdened with consumer debt, and most of that stems from their lifestyle. However, if we millennials didn't feel the need to keep up, perhaps affording a home, starting a business, and starting a family could have occurred sooner.
While it might seem like I am grasping at straws, the social comparison is a large cause to why many adults simply can't stay consistent with their financial goals. Having the cool jeans in high school turns into having the big house as adults.
But we have to run our race, not try to run 50 races at once!
9. Lastly, invest in yourself in 2021.
With all the talk of bull markets, bear markets, investing, and all that jazz – what many of us fail to recognize is that the best investment we can make is in ourselves.
Sure you can invest in Tesla like everyone else, but what if you read a few more books in 2021? How would you feel if you learn a new skill, start a new side hustle, or learn a language?
Point being, is when we invest in our own minds and personal growth, good things are more likely to happen. There is no guarantee in life, which 2020 showed us. However, when we invest in ourselves, that can't be taken from us.
We feel better about ourselves, accomplish more and are happier when we improve ourselves!
Here are a few simple ways to invest in yourself in 2021!
The best investment is always in yourself than others.”
The Verdict –
If 2020 was any indication of how bad a year can go, it would be safe to assume that there may be a similar year in the future. Perhaps it is way down the road, either way, it would be wise to prepare financially, instead of having to repair.
So no matter what anyone tells you, you control what happens in your life when it comes to finances! This is the mindset you need to adopt for 2021 when it comes to money.
Does this mean you control getting laid off or experiencing a job loss? No in most cases that is out of your control. However, you do control whether or not you saved up enough for a 6-month emergency fund to get you through the loss of income period.
Wait, are you saying that I can get out of student loan debt? Yes, you can, it just means you might have to adjust some of your habits, choices, and lifestyle for a period of time.
Are you really saying that I can actually be successful with money? Absolutely, as long as you begin to embrace the fact that you will be!
Be the change.
While the idea that you control what happens in your life is becoming increasingly less popular in this day and age, the fact of that matter is when you adopt this mindset, things seem to stop happening “To You” and start happening “For You.”
Put another way, when you go to the doctors office and get a physical, if they say your eating habits need to change you have one of two possible choices:
- You listen to your doctor, take their recommendation, and start eating healthier
- You tell them they're wrong, you hunker down and continue to eat the same way
Regardless of what choice you go with, you control that choice. And as the saying goes, to create different results in our life, we need to start making different choices.
However, this should be invigorating to know that you have that with some small habit changes and a few new choices using the money tips from above, you can really make 2021 and beyond a great year.
Just remember, things will happen, life events will occur, and no matter what stay consistent, persistent, and determined! Here is to a great 2021!
Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $300,000 in student loans with his wife in less than five years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post, and many more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their newborn son, their chocolate lab named Morgan, working out, being outside, traveling, and helping others with their finances! In case you were wondering, Josh uses Personal Capital to track his net worth and his first investment account ever was an Acorns account 😎