2020 was rough, but 2021 holds more promise. For those unemployed or underemployed, mass vaccinations promise not just a cure to COVID-19 but also a gradual restoration of jobs. And for those fortunate enough to still have a full-time job or be able to piece together a full-time income, the end of the pandemic promises an impending return to normalcy: kids back in school, limited travel restrictions, and masks relegated to Halloween once again.
This past year, many of us realized how far we were from a firm financial footing. So in this new year, we must prioritize our financial health as much as our physical well-being. Before we take another step towards our bucket list or spend another dime, we should take steps towards one or more of these four financial resolutions.
Pay Down Debt
Make sure to dedicate some portion of your income towards paying down debt. If you've been making minimum payments on an installment loan, increase what you pay each month. If you're underemployed or unemployed, once you're making enough money again, after expenses, there's a little leftover, commit to using some of that leftover towards your debt. Consumer debt will prevent you from building savings and wealth, so prioritize paying it down or off this year.
Establish or Replenish Your Emergency Savings Fund
It was a well-known fact that too many Americans lived paycheck to paycheck before 2020. In January 2020, only 41% of Americans could cover a $1,000 emergency. And given the devastating impact of the coronavirus pandemic, that number has likely shrunk precipitously. Take a portion of each paycheck and put it aside in a savings account. Even saving as little as $5.00 per period pay will add up over time. Emergencies happen, and you need to be prepared.
Build a New Income Stream (Or Two)
It's long been an adage in entrepreneurial circles that a full-time job is a risky way to make a living. Entrepreneurs, whose income comes from multiple sources, can survive if they lose a client or two. But if you lose your full-time job, all of your income is gone. This year, establish a new source of income in addition to the one(s) you already have. Consider:
- Freelance writing / graphic design / photography
- Retail arbitrage
- Writing and selling an e-book
- Becoming a rideshare driver
These are just a few ways you can make money in your spare time. You can also start your own business. Whichever path you pursue, get started this year.
Investing a portion of your income in securities can help you build wealth in the long-run. It's best to prioritize paying down debt and establishing an emergency savings fund first, as debt payments and emergencies may force you to cash in your investments early. But if you've got some savings and most, if not all of your debt paid off, put some money aside each month into some stocks, bonds, mutual funds, or other securities to grow your money faster than it would in a savings account.
Being financially stable allows us more opportunities to do what we want and alleviates a tremendous source of stress and anxiety. And while the echoes of 2020 continue to reverberate this year, we should all resolve to get ourselves more financially fit and healthy for ourselves and our families.