Despite the toll 2020 took on many, optimism for a brighter financial future is still felt by many Americans.
Nearly three-quarters (72%) think they’ll be in better financial shape in 2021 than they are in 2020, according to new study from Fidelity Investments, and almost two-thirds are considering creating a financial resolution for the new year.
“Americans are clearly ready to leave 2020 behind and start 2021 off on the right foot, including when it comes to their finances,” said Stacey Watson, a senior vice president who oversees life event planning at Fidelity Investments. “This year’s top financial resolutions are consistent with what we’ve seen in the past. However, what makes 2021 unique is how people will achieve them, given the financial pressures and major life events many continue to experience throughout the pandemic.”
Citied among the chief concerns for 2021 were the pandemic’s impact on the economy, unexpected expenses, and the rising cost of food and other essentials. Given the headwinds experienced in 2020, here’s how you can prepare your financial new year’s resolutions.
Begin with a budget
Of those who said they were in a “better” financial situation this year compared to last, more than 1 in 5 attributed that success to budgeting better, the survey concluded. Online tools and apps like Goodbudget, Mvelopes, Mint, and You Need a Budget make tracking spending and saving easier.
Here’s a good explainer from Cashay and the Financial Fitness Group that breaks down how to put a budget together.
Replenish your rainy day fund
An account with three to six months’ worth of expenses is what Fidelity recommends as its emergency savings goal. But when there are financial setbacks, there’s not much room for saving, which is why more than 8 in 10 Americans say they want to build up their emergency savings in 2021.
Meredith Stoddard, life events experience lead at Fidelity, emphasized that replenishing (or creating) that financial cushion should be a priority, so credit cards aren’t bridging expenses or covering missed bills. When you’re starting out, Stoddard acknowledged that saving can be a daunting task, so start small instead.
“If you have $0 saved just get $100 in there or $50 and start somewhere, because that first $50 turns into $250 and $350 and so forth,” Stoddard said. “Just doing any little step to get the momentum going and nudging the trajectory in a direction is gonna build towards something over time.”
Cashay and the Financial Fitness Group also provides a step-by-step guide on building that emergency fund.
Find new sources of income
Nearly two-thirds said they plan to find new ways to make money in the new year, the survey found. Even in the gig economy, “there's definitely opportunity out there,” Stoddard said, but it requires people to be “a little more creative to figure out.”
Seek out an accountability partner
Writing resolutions is a great first step, but the key to following through with your goals for the year is to set clear and specific goals. Similar to a workout partner, a third party can help you stay on track. Having someone to hold you accountable plays a role — nearly 1 in 5 cited this as a winning strategy that helped them achieve their 2020 financial resolution, according to the Fidelity survey.
An outside source can be someone like a financial professional, but if their services are outside of your budget, tap a responsible and trusted friend or family member to advise you.
Read more information and tips in our Budgeting section