Right now is always the best time to change your habits for the better, but the beginning of a new year may be the best excuse to get on the right track, especially when it comes to spending and saving.
To help you get in the best financial shape in 2021, Inverse reached out to Jaime Kobin, a financial advisor and investment advisor representative at Fortis Lux Financial, and Douglas A. Boneparth, a financial advisor and president of Bone Fide Wealth, to share their top money tips for the new year.
6. Do a financial check-in
“As you begin 2021, it’s important to understand your progress, especially in light of the challenging year many people have faced,” Kobin said. “Reassess your goals and your current situation (assets, liabilities, cash flow). Where are your dollars going? Do you have a systemized savings strategy? Are you being tax efficient? Are you prepared for unexpected events? Do you have an adequate emergency fund?”
5. Automate everything
“From monthly bill pay to saving and investing, try to automate as much of your financial life as possible,” Boneparth said. “Putting systems in place so you don’t have to constantly think about your money is one of the best things you can do to step up your money game next year.”
4. Review your insurance policies
“Has anything changed in your life that warrants a new policy or a modification of your protection — life, disability income, long-term care, home, vehicle, etc.?” Kobin said. “An unexpected event could derail your growth strategy if it requires you to deplete assets. Risk management is a critical part of a holistic financial plan. While you’re reviewing policies, make sure to check your beneficiaries. Financial accounts (e.g. insurance, bank, brokerage, retirement account at work, etc.) with named beneficiaries bypass probate and can save loved ones time and money. Beneficiaries should be updated as needed due to marriage, divorce, birth, or death.”
3. Build up a strong emergency fund
“You never know when something like a global pandemic might strike,” Boneparth said. “Between the Great Recession and Covid-19, there’s plenty of reasons to see why having a plush cash reserve can be the difference between staying the course and going off the rails.”
2. Review your investments
“Most people are familiar with the concepts of asset allocation and diversification within a portfolio, as well as the idea of rebalancing at specified intervals,” Kobin said. “It’s important to not only look at your allocation (equities, fixed income, real estate, etc.) and risk tolerance and time horizon, but also the location of those assets. Consider characteristics (e.g., liquidity and tax consequences) of each account. Create a plan and stick to it. Consider engaging the services of a financial planner if you’re not already working with one.”
1. Tune out the noise
“2020 was a year for headlines,” Boneparth said. “There was a trade war, pandemic, murder hornets, an election, and a dozen other sensational events to distract you from focusing on your goals. Our worst financial mistakes come during the times we are most distracted. It’s important to pay attention to the things you can control and to try and ignore the rest.”
If you’d rather not save up money, you could always just go the Elon Musk route: