5 Steps To Take With Your Money in 2021

No matter what you had planned for your personal finances at the beginning of 2020, the pandemic probably got in your way. COVID-19 created a wave of massive challenges for many people, but Sheila Padden, CFP, founder of Illinois-based Padden Financial Planning, saw a silver lining amid the disruption.

“If nothing else, [the past year] has forced many of us out of our ordinary lives and perhaps turned a bright light on what is essential for our happiness and fulfillment,” Padden says. “2020 has been a bell of awakening.”

With a new year hitting, this is a perfect time to listen to that bell and reflect on your saving, spending and investing behaviors. We caught up with personal financial experts from across the country to hear how they are approaching 2021 and what they believe can make the next year – and the years after – more financially fruitful.

5 money moves to take in 2021

1. 1. Review your subscriptions
   2. Start investing with a small amount
   3. Enroll in a crash course in cryptocurrencies
   4. Create a budget
   5. Think bigger than next year

Review your recurring subscriptions

A whole year might sound like a daunting timeline. Instead of setting a grand goal to hit by next December, consider thinking a bit smaller to uncover savings.

“A New Year’s resolution is to better keep track of spending and see if you can find savings in the new year,” says Chris Reddick, CFP, financial planner and owner of Texas-based Chris Reddick Financial Planning. “You will be surprised how many subscriptions you have not used can be cancelled, or [think about] curbing coffee runs and going out to eat.”

Elizabeth Buffardi, CFP, founder of Illinois-based Crescendo Financial Planning, also highlights the importance of reviewing those recurring monthly charges for Netflix, Spotify, Blue Apron and other services.

“Nowadays, many things are on a subscription basis, but sometimes life gets in the way, and we forget to cancel the things we don’t use,” Buffardi says. “By cancelling things you no longer want or use, you free up money for things that actually give you joy.”

Start investing with a small amount

The small mindset will pay off in 2021, and it will be meaningful for your retirement outlook, too. If you already have emergency savings, consider investing.

“You do not need to have $1 million or all of your bills paid off,” says Andrew Feldman, CFP, president of Illinois-based AJ Feldman Financial. “Start with a small amount, and be proactive. If you already have a plan, be proactive. Make sure you have reviewed it recently and with all of the market movement are you allocated properly.”

Enroll in a crash course in cryptocurrencies

Over the past year, Bitcoin has made lots of big headlines. The blockchain-based currency swung wildly, dropping to under a $5,000 valuation in March before finishing the year on a surge above $23,000. Those ups and downs can create plenty of stomach-turning anxiety for low-risk investors, but you may want to weigh the pros and cons of cryptocurrency in the new year.

“In 2021, I want to make it a point to have a better understanding of cryptocurrencies and how they could be incorporated into a client’s portfolio and financial plan,” says Dan Herron, CFP, co-founder of California-based Elemental Wealth Advisors. “Since crypto is becoming more mainstream, we would be doing a disservice to our clients, as advisers, to not understand this emerging asset.”

Create a budget

Cryptocurrency might be a big change, but there is one piece of personal finance strategy that remains constant: You need a budget.

“It’s so easy to fly blind when it comes to your income and expenses, but it’s so important to keep close track of your finances with a budget,” says David Sterman, CFP, president and CEO of New York-based Huguenot Financial Planning. “For people who are comfortable using spreadsheets, that is often the best approach, though there are also many useful budgeting apps you can download.”

Worried that a budget will uncover reasons to feel bad about your money management? Don’t be.

“Many people find that focusing on their budget will make them feel badly about how much they spend, but that’s not usually the outcome,” Sterman says. “Instead, people develop a sense of empowerment when they come to see how their spending relates to their income. And by creating a budget, you’ll have a better sense of how much you can spend each year on discretionary items such as contributions to an investment account, a new car or a long-awaited big trip.”

Think bigger than the next year

Resolutions often focus on the road right in front of you and your bank account, but Padden – also a Registered Life Planner (RLP) – will use 2021 for more than a strategy for the immediate future.

“This is a resolution that I am making — to know what is truly at my heart’s core, so I can live with ease and purpose,” Padden says. “I am committed to revisiting financial life planning in January and February with all my clients, so [that] core purpose is at the center of all that we do in 2021.”

Padden uses a few key questions with all her clients to help frame that purpose.

“If you have enough money, how would you live your life?” she asks. “Would you change anything? If you only have five to 10 years left to live, what would you do in your time remaining? Would you change anything?”

“If you suddenly find out that you have one day to live, what did you miss?” she asks. “What did you not get to do? Who did you not get to be?”

Padden says that the questions are often the catalyst for “clarity and purposeful action.”

If you need to find your purpose, you might first need to find a way to overcome feeling overwhelmed. Check out our guide on how to deal with financial stress.

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