If you thought 2020 was a tough year financially, you’re not alone. When COVID-19 became a global pandemic, layoffs happened, debt rose, and small businesses struggled. But it’s a new year, and financial success could be right around the corner.
Many people are using 2021 as a financial reset. You can get yourself in good money shape by following these seven tips for a successful financial year.
1. Straighten out your credit
In 2020, your credit card may have had to come to the rescue one too many times. This year, it’s time to give a different card in your wallet some love — your debit cards. High credit utilization will hurt your credit score immensely. This year, take the time to learn and understand what affects your credit score. Here are five of the top factors that impact your credit score:
- Payment history
- Amounts owed
- Credit history length
- Credit mix
- New credit
Keeping your credit utilization low is important. In addition, you can consult a credit reporting company to see what else is hurting your credit score. Do you owe a large amount? Work on paying off debt. Is your payment history not great? Set up automatic payments. Knowing what you need to work on will enable you to take baby steps toward improving your credit in 2021.
2. Establish a budget
Creating a budget is essential if you want to spend less and save more. It doesn’t matter whether you’re living paycheck to paycheck or have plenty of money to live comfortably. A budget allows you to exercise discipline and see where your money is going.
Use an online budgeting tool to create a budget and stick to it. You’ll be amazed at how quickly your budget helps you achieve your other financial goals and save while doing so.
3. Cut out what you don’t need
While you’re in the process of creating a budget, ask yourself the tough questions. What expenses can I cut out? There’s always going to be essentials: food, rent, etc. When you lay out every monthly expense to your name, though, you’ll start to notice where your money is being wasted.
Cancel subscriptions that you don’t need and cut back in areas where you’re spending too much. This can mean switching to less expensive grocery items or finding ways to lower your utility bill. By trimming expenses and cutting back, you’ll have more wiggle room in your budget.
