The New Year is finally upon us, and while we're all hoping 2021 provides a return to normalcy, if 2020 taught us anything, it's to prepare for the unexpected. This past year was a challenging one in many ways, including for many people, financially.
As you consider your New Year's financial resolutions, look at the lessons of 2020 to guide you, says Tiffany Aliche, aka The Budgetnista.
Aliche weighed in on Grow staffers' financial resolutions for 2021, and offered three tips to set yourself up for success with whatever money goals you set for the new year.
"Be intentional when you're setting your New Year's financial resolutions before the new year actually comes," she says. "It's really important with the kind of year we just had, that you look forward to the new year with hope, with boldness, with joy, but also with intention!"
What does it mean to be intentional? Like most New Year's resolutions, achieving your financial goals will be easier with a clear, straightforward plan, Aliche says.
Video by Stephen Parkhurst
For example, Grow writer Shawn Carter wants to beef up his emergency savings. Shawn says he's aiming for 3 to 6 months worth of expenses, which he estimates at $6,000 to $12,000.
"This makes my heart sing! But honestly Shawn, it depends on your industry," Aliche says, pointing out that the right goal amount will vary based on factors such as your expenses and job prospects. Suze Orman recently told Grow that the pandemic has shown the need to save even more. "The truth of the matter is, it's probable that you should have one year of an emergency fund right now," Orman said.
If you have multiple financial goals, it's important to figure out how much money you're working with and which goal to prioritize.
Helen Zhao, a Grow video producer, wants to start investing during 2021. Aliche recommended Zhao start by making the most of her workplace retirement plan and focusing on Warren Buffett's favorite investment, index funds.
But she also pointed out that would-be investors like Zhao should first make sure their other financial bases are covered. For example, experts generally recommend paying down high-interest debt and building an emergency fund before focusing your financial efforts on investing.
"Are your bills paid on time? You'd be surprised at how many people are not on time with their bills, yet they want to learn how to make more money in the market," Aliche says.
Video by Mariam Abdallah
Grow writer Gili Malinsky is also planning to beef up her emergency savings. To help her save regularly, Aliche has a simple, but often overlooked, suggestion: Pay yourself first. "Split it before you get it," she says. "Ask HR how many ways you can split your direct deposit." You may be able to have a portion of your paycheck automatically sent to a separate savings account. You might also set up automatic payments or recurring contributions to your savings and investments.
By paying yourself first, Aliche says, meeting your financial goals is easier. "You don't even have to think about it. It's like budgeting without the budget."
More from Grow: