How to improve your finances in 2021?
Photo by Kelly Sikkema on Unsplash
It’s no denying that 2020 has been a challenging year thus far. The global growth rate is projected to be at -4.9% in 2020, and the recovery is forecasted to be much more gradual than the previous forecast. With all of this uncertainty, it’s crucial to keep an eye on your financial health.
With another couple of months to go before putting 2020 behind us, the last thing you’d want to worry about is your finances. These are unprecedented times, so you should do what you can to cut back on unnecessary expenses, invest, and save. Here are a few tips to help you get through the rest of the year.
Have an emergency fund
Since these are difficult times, it’s essential to have an emergency fund. That way, even if you lose your job, you’ll still have sufficient money to tide you through until you find a new job. An emergency fund would also mean that you wouldn’t have to tap into your investment account if you’ve got no money in the bank. Withdrawing your investments early could result in losses, and that’s not something you want.
To prevent such a situation from happening, try and save a portion of your current income and place it in the bank – just in case, your financial situation gets worse.
Try to have a diverse mix of investments
When the pandemic first hit, the stock market got hammered, and even recession-proof industries took a beating. Given the evolving volatile situation, opting for a diversified portfolio will help with minimizing your losses.
At this point, you should take the opportunity to assess your portfolio and make changes just in case the market crashes again. While 2020 may not have been the best year, it’s best to have a long-term approach. Rather than only looking at your portfolio over the next few months, try to focus on looking at it long-term instead.
An excellent investment to take a look at is active ETFs. These investments are managed by experienced portfolio managers and utilize a wide variety of investment strategies, so it’s great for those looking to reduce overall market risk.
Meet with a financial planner
Now’s a great time for you to speak with your financial planner, go over your current investments, or update him or her on anything that may have changed. It’s vital that your existing investment plans are still in line with your financial goal, and your financial planner can also offer you some suggestions or tweaks that you can make according to your current financial situation.
Sell things that you no longer need
If there are some clothes, electronics, or other items lying around the house that you haven’t touched in 6 months, it’s time to look at selling them online. You can do it on various platforms such as the Facebook marketplace, apps such as Letgo, and more. Not only will it help you rake in some additional cash, but you can also free up some space at home.
Take a look at your current expenses
Audit your bank statements and see if you’re able to eliminate any unnecessary expenses. If you’ve still got recurring memberships going, consider canceling them — especially if they’re not essential.
Diversify your income
If you’ve got some time on your hands, look at diversifying your income. You can pick up a new skill such as graphic design or baking and look at selling your items or offering your services online. There are plenty of freelance platforms for you to sell your work, and a side hustle is a great way for you to increase your income.
Start early
With 2020 throwing multiple curveballs, it hasn’t been easy to save money. By utilizing some tips listed above, however, you’ll be better able to manage your finances. Try to map out a financial plan and stick to it so you’ve got an idea of what your expenses will look like for the next couple of months.
In the meantime, take a deep breath and know that this will pass. By managing your finances early, you’ll already be in a better situation than most and will have some funds to tide you through the rest of 2020.