21 financial goals you should set for 2021
It’s officially that time of the year for setting new intentions and goals & while some people think it’s cheesy to say “new year, new me”, I love the hope that a new year brings. While 2020 was trying (to say the least), we have a chance now to look ahead and build a brighter future. Here are 21 goals for 2021:
1. Build your starter emergency fund ($1,000)
Maybe you have never had an emergency fund or maybe 2020 has emptied your bank accounts - whatever the reason you don’t have this crucial safety net, now is the time to build it. I personally had emergency wisdom teeth removal surgery in December 2020 after becoming very ill from an infected tooth (I guess you can’t get away with leaving them in forever) and the cost of surgery was $1,392.00 plus another $26.93 for pre- & post-op medications. It came two weeks before I was set to close on a house and one week before Christmas - talk about stressful! I was incredibly grateful to have the cash to cover this expense, but now I need to rebuild what I lost. Whether it’s yourself or someone in your family, emergencies come up and it is a big relief to know you are covered. Don’t delay on this one!
2. Build your “oh shit” emergency fund (3-6 months)
The majority of us experienced stress this past year over potential loss of income or actual loss of income. I started a new job in March of 2020, two weeks before everything went remote, and there were major layoffs and “skills assessments” to determine who could stay. For my new partner, there were serious talks of furloughs in the summer months. We were ultimately extremely lucky to remain employed! Despite keeping our jobs, it reminded me how easily we could be let go and that depending on an employer month-to-month is never a solid financial plan.
While one strategy to determine the amount you need would be to take your paycheck and multiply that out to 3 or 6 months worth of paychecks and save towards that, I personally found this number overwhelming to save towards. Instead, I chose to look at only my absolute necessary expenses for the month (mortgage, utilities, food, gas, minimum payments on debts, etc.) and multiply this out. This assumes that I would cut any unnecessary subscriptions and frivolous spending from my life in an emergency and makes the savings goal much more achievable. You can always do this first then come back and beef up your emergency fund for the full amount of your monthly pay.
3. Create a budget and live by it
Maybe in an app though with automated transaction tracking instead of on a notepad… just sayin’
Having a budget is a necessity to know where your money is going. “What doesn’t get measured, doesn’t get managed”, as the saying goes. I often think I’m spending less than I am… until I open my budgeting app and see all the transactions piling up. If you’re new to budgeting, I recommend taking the first month to just create a budget and track all your transactions honestly to get a good feel for what you are currently spending, then try to work on cutting specific categories to fit your goals in the following months. I use Every Dollar, which is a Dave Ramsey app, and pay for the pro version because I believe so much that tracking my money is worth the subscription cost.
4. Become (bad) debt free
Debt creates a cloud over our heads that weighs us down, but not all debt is bad. Focus your attention on getting rid of those high-interest rate debts, such as credit card bills and personal loans. You can get started paying off your debt with either the snowball method or by attacking the debt with the largest interest rate first - just make sure you are making at least the minimum payment on all your debts each month!
5. Save for retirement (401K and Roth IRA)
While retirement may seem far away, investing as early as possible will you get the most results due to compound interest. According to a video by CNBC, a 25 year old only needs to save $319 a month at 6% rate of return to have a million dollars in retirement whereas someone who starts when they’re 30 has to save almost twice as much per month ($613) to have a million dollars by retirement. My company offers 80 cents for every dollar saved into my 401K up to 5%, so I save exactly up to the 5% amount to receive the employer match. Since I’m twenty-four, I’m well on track to becoming a millionaire by retirement (but hoping to reach that milestone a lot sooner)!
6. Automate your savings
In 2020 I set up my first auto-savings account with Yotta bank of $25 every two weeks. This amount seemed small enough that I wouldn’t miss it and, surprise, surprise, it’s the most consistent I’ve ever been saving! I’m at $176.33 as of this article, almost a fifth of the way to that first goal of a $1,000 emergency fund.
7. Increase your credit score
Credit scores are important for meeting your financial goals and cannot be underestimated or overlooked. Having a bad credit score will cost you thousands in interest because you’ll be given worse rates on loans (car, home, etc.) but will also cost you hundreds or thousands in missed opportunities. If your credit score isn’t good, you may not be approved for a loan to start that new business, buy that rental property, or get that new credit card with amazing rewards that will save you money day-to-day. A high credit score equals opportunity. Even if you are not interested in getting a major loan this year, renting an apartment or getting a new job will often require a credit check, so this score could impact your ability to secure housing or employment. I check my scores on Credit Karma using their mobile app.
8. Lower your spending/live with intention
Living with intention was my mantra for 2020 and will continue to be for 2021. I had anxiety attacks over the amount of clutter and stuff that surrounded me in my home and really related to a quote that stated: “Look around, all that clutter used to be money”. I realized that even though I had moved over a year ago, there still was stuff in the trunk of my car from the day I moved. If I hadn’t needed it in a year - why did I still have it? Did I even need it when I bought it? I made an effort to sell the items and watch more carefully what I spent my money on.
With coronavirus and transition to remote work, I ended up spending less going out on the weekends and to lunch with coworkers. I stopped buying coffee on my way into work and at lunch from the café on the first floor. I no longer had to pay $25/day parking at the office, for the light rail, or even for gas since I was working from home. Since I went out less, I spent less on clothes and makeup. My boyfriend doesn’t drink alcohol so I naturally over time ended up cutting back as well, even attempting Sober October which was really eye-opening to the cost of alcohol. While I imagine with vaccines becoming available, some of these “going out” costs will be reintroduced back into our lives, it’s important to realize what is important for your overall life goals and only bring back what is actually valuable to you.
A message I have loved is to stop saying you “deserve” that outfit or you “deserve” that Starbucks coffee. What you really deserve is to be financially secure, stress-free, and living the life of your dreams.
9. Increase your income
There’s only so much you can cut from your budget before you need to start looking at the other part of the equation: your income. I know that I personally feel grateful to simply have a job in 2020, even though the 2% rumored raise was not as much as I had hoped it would be (and is not even officially announced). The sad truth is that staying with a company will (usually) not increase your income as much as consistently changing jobs. I know when I changed jobs after one year in the software industry, I earned 17% more at my new job. My fellow coworker (younger than me and with two years of experience) recently accepted an opportunity that gave him a 40% raise - albeit, requiring a move to a more expensive city once coronavirus vaccines are widely distributed. Whether it’s changing jobs, asking for a promotion at your current job, starting a side-hustle, or investing to increase your passive income - make an effort to earn more this year!
10. Set a savings goal for a major purchase
Life is not all about increasing your income and hoarding cash - and if you try to make it that way and are anything like me, you might go on a shopping binge, buying things you don’t actually need or want in the long-term just to spend some cash. Instead, pick something important to you (a vacation, a high-quality coat, a gaming console), and save for it every month. Studies have shown that when you plan for something in advance you get the double the enjoyment from it - actually having it, and the anticipation of having it!
11. Create a passive stream of income
Ah, passive income - the FIRE dream to sit on a beach, retired early, as money keeps pouring into our investment accounts. In fact, a study has proven that millionaires have seven streams of income on average. Well - all this passive income doesn’t come from thin air, it comes from hard work, saving and investing your income while making sacrifices on other purchases. The earlier you start, the better due to compound interest, so make this the year that you have at least one passive stream of income. This could be beginning a stock portfolio &, buying stocks that provide dividend income or growth, creating creative work that will pay you royalties in perpetuity, or buying real estate on which you can charge rent.
12. Start your side-hustle
If you have a bit more time on your hands, then this year is the year to start a new business, part-time job, or creative hobby that you do for fun. It increases your streams of income while letting you work on something that is hopefully fulfilling and important to you. It’s possible that it could even become your full-time job if you do it right! My partner picked up a part-time job at a gym to save on the membership cost and also to work on his people skills - this is a great idea to work somewhere that will save you money on a product or service that you use while also developing yourself as a person.
13. Master one of the four pillars of financial IQ
In Robert Kiyosaki’s book Rich Dad Poor Dad, he recommends people become masters of four financial categories:
Accounting - the ability to read numbers and a variety of financial statements
Investing - quickly described as “how to make money make money”
Understanding markets - more like the principles of economics, such as supply and demand
The law - tax advantages & protection from lawsuits
Why not pick one for this year and start learning?
14. Stay current on events and companies
It can be hard to know what to invest in if you don’t know what’s going on in the market. Are house loans low or high? Is it a seller’s or buyer’s market? Is Apple really making their own electric car? If you want to invest in Apple or a competing electric car company, you should know the answer to that. Try listening to podcasts or signing up for a newsletter to keep up-to-date with the market.
15. Read 6 books
Read one book that will help you with your finances, whether that be through personal development or direct financial knowledge, every two months. Here are five of my personal favorites from the last year:
Rich Dad Poor Dad by Robert Kiyosaki - an incredibly good book to help illustrate the power of money invested versus money earned by hours of labor
The Confidence Code by Katty Kay and Claire Shipman - as a woman, this book helped give me more confidence at work and also gave me more knowledge of what it’d be like to be a manager to women in the future (which is a career goal of mine in the tech industry)
Atomic Habits by James Clear - an absolute must if you struggle on the will-power front and you will need will-power to get your finances in order and build the life you want
The Happiness Advantage by Shawn Anchor - this book discusses how happiness can help you get ahead in life and at work, both of which translate to success
The Moment of Lift by Melinda Gates - my favorite book of all-time. While I’m sure this is an unintended side-effect, I realized how blessed I was after reading this book and significantly cut back my frivolous spending. I even became more charitable, sponsoring a child in Guatemala. If your lifestyle is excessive, give this book a read to realize how you, too, could live with less
From my list above it should be obvious that the books you choose don’t have to be centered around finances - knowledge on creating better habits, living minimally, improving your confidence at work can all have a significant impact on your finances in an indirect way.
16. Learn a new skill/invest in yourself
It can be easy to get comfortable working 9-5 and not investing time in the evenings or afternoon to improve ourselves - but this is the time that can really determine your ability to make it to financial freedom. I work in tech, which is constantly changing, so developing new skills is a must for me to stand-out, get promotions, or look for new, higher-paying opportunities. If you want to get out of your current industry, you’ll almost certainly need to spend time after work learning the skills of your new field since you can’t learn them on the job during your work hours. Carve out 30 minutes in the early morning or lunch or a few hours on the weekend to improve yourself.
17. Negotiate on at least one of your bills
I was surprised when I went to close on my second home to hear that my closing attorney shops around for home insurance every. single. year. I just assumed you let it renew and then after five years or so you switch companies! While I work in InsurTech and get an employee discount that is hard to beat, shopping around for on the following bills could really help your monthly budget:
Car insurance
Health insurance
Home insurance
Phone bill
Internet bill
18. Make a 1, 3, and 5 year plan
Knowing where you want to go is not-so-surprisingly crucial to actually reaching your destination of financial wealth and/or independence. You’re unlikely to just stumble into it - it takes hard work! Take the time to write down where you are and where you want to be five years from now on (or when you’re even older if you know that far ahead). Once you have your bigger goals, you can work backwards to develop smaller, more actionable goals. Dream big, but also be realistic! You can always come back and edit this plan as the months and years unfold. Here is an example using goals related to my blog:
Example 5 year goal: Be financially independent based on blog earnings
Example supporting 3 year goals: Have at least three different types of income streams on the blog (ads, affiliate links, physical product shop) and 500,000 visitors per month
Example supporting 1 year goals: Post regularly once a week until June, then increase post regularity to twice a week for the remainder of the year. Respond to emails and comments twice a week. Set up AdSense and create at least 10 posts with affiliate links by the end of the year. Begin brainstorming products that fit the blog’s brand.
Notice how the 1 year goals are much more specific and are tasks that I can do while the 3 and 5 year mark are more like goal-posts to check in on my progress.
19. Try at least one financial challenge
I love challenges because they feel less intimidating to start and complete than a full-on lifestyle change. They’re almost like a “lifestyle trial” with a fixed end date and you can decide from there if you want to keep the new change around. Here are some lifestyle challenges that will help make an impact on your spending:
Spend less than $30/week on groceries
You can change this amount to fit your family, but food is often where a good portion of our flexible income goes. Try to get this number down - just for a month - by getting creative with the food you already have at home and being mindful with future purchases.
No social media for a month
You may be wondering how this helps with your finances, so allow me to explain. Social media has become influencer-central where we’re constantly exposed to ads (some obvious and others not so obvious). We compare our lifestyle to strangers online and want to buy the latest items. By reducing exposure to ads and comparing ourselves to others less, you won’t feel as tempted to shop.
Dry January and/or Sober October
That’s right - no alcohol for a month! I did Sober October in 2020 and was shocked by how much money I had left over in my bank account (at least $40 more per week). Not only that, but it completely reset my relationship with alcohol and going out. I buy alcohol less often even though the challenge is over, continuing the savings even to today.
Make your coffee at home for one month
Another big change I made in 2020 was to stop my Starbucks dependence (which you can read about in my first blog post here). The savings added up to a mortgage payment over the year, making my coffee machine one of proudest investments. Committing to make your coffee at home for just one month makes doing it much more achievable than just saying you’ll buy less coffee out in 2021.
20. Go green, save money
Is being eco-friendly one of your 2021 goals? It could save you money! Whether it’s buying less water bottles and reusing a cup you already have or skipping the trash bag waste and using the bags you get for free from the grocery store, small changes can cut costs all while helping the planet. A few dollars here and there can add up to big savings across the entire year!
21. Invest in your health
This one seems less obvious but is actually incredibly important. By taking care of your body - via gym memberships and healthy food - you’ll save money in the long-term on sick days, i.e. missing work/pay, and expensive medical bills (if you live here in the U.S.). This applies to a lot of things in life, actually - take your car for example. It’s much cheaper to do preventative care, such as changing your oil regularly, than it is to push your car past its limits and pay for an expensive repair.
I hope you found this list useful and will take some (or, heck, even all!) of these goals into 2021! Happy New Year!