In many households, 2020 has seen changes in our financial lives.
The COVID-19 pandemic changed what we spend on and what we save for, such as more groceries due to working and schooling from home or less on transportation and parking. For others, the pandemic has had an immediate, and in some cases lasting, impact on income.
Every year at this time, experts recommend a financial checkup to gauge where people met, exceeded or fell short of financial goals. It’s an opportunity to reset, expand and tweak goals based on where we are and where we want to be financially.
This year, a financial checkup can not only help you budget for 2021, but also provides opportunities to take advantage of some consumer protections and market trends to make your money stay safer and go further.
Here are some financial recommendations to consider when looking at your 2020 finances and 2021 goals.
Assess New Spending Habits
Has the pandemic changed your work or school routines? With many employers and school districts going at least partially remote, our routine spending has changed too.
Typical daily expenses like eating out for lunch or grabbing a morning coffee on the way into the office have been replaced by more spending on groceries or takeout meals. Household bills, such as heating, cooling and electric, may have increased due to more time at home too.
Take a hard look at how these expenses have increased or decreased in 2020 and apply those costs to your 2021 budget. Then, reassess as your personal routines change throughout the year and determine if you should increase what you save for these expenses or contribute more to savings.
Check and Protect Your Credit
During the pandemic, since many more of us are online, fraudsters have increased their activity and created new ways to steal people’s information and money. Some of these tactics have been directly related to COVID-19, such as scamming people over supposedly suspended social security numbers to get their stimulus checks and online offers for home COVID-19 test kits.
Through at least April 2021, the three main United States credit bureaus (Equifax, Experian and TransUnion) are offering consumers free credit reports weekly through https://annualcreditreport.com, the same website used to get free annual credit reports. Take advantage of this offer and monitor your credit closely to identify potential fraud on your accounts or identity theft.
You can also view real time updates about current COVID-19 scams by visiting https://www.ftc.gov/coronavirus/scams-consumer-advice.
This is also an opportunity to check on any loan deferments or forbearances you have are reported correctly, as they should not affect your credit.
Complete your credit checkup by making sure you have the best options in your wallet to fit your needs. If you use your credit card for common expenses like groceries (especially if you are spending more on them) or for monthly recurring bills, a cash rewards card can help you earn money from your spending.
Expecting a Tax Refund? File Early.
If you are expecting a tax refund in 2021, consider filing as early as possible. Consider the best use of having the extra money on-hand, whether boosting your savings, adding to your retirement funds or taking advantage of historically low mortgage rates and increase your down payment on a new home.
Just remember that with an uncertain environment expected for the next several months, it’s important to have a solid savings built to withstand unexpected changes to income or costs, such as increases in utility costs through the winter months.
Reassess Your Banking Preferences
Now is a great time to reflect how you’ve been conducting your banking in 2020 and your preferences for 2021. The pandemic has increased use of digital banking tools, including peer-to-peer payment apps like Zelle® and Apple Pay.
Have you been using these tools in 2020, or are considering others like setting up automatic savings or depositing checks using mobile deposit? Simple steps like these can make managing your money easier.
Don’t Stop Saving for Retirement
Volatile markets or changes to income situations may bring the temptation to step away or take a break from saving for retirement.
Stay the course. Experts agree that investors should remain steadfast in saving for retirement, if possible. Now may be a good time to look at your investment strategy and adjust or seek help from a financial advisor to make sure your retirement goals are still on track.
While the short term may be unsettled, don’t lose sight of what you were able to accomplish and your long-term financial goals, like growing an emergency fund, to help you navigate 2021 and beyond.
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