The year 2020 was the nightmares which many of us would want to forget at all costs. Nevertheless, this year also taught us about many aspects of life which we don’t pay attention to. Everyone learned the lesson for good from the year 2020 and has started working on it.
As we have moving forward towards Unlock 2.0, now the finances, economy, employment markets, stock markets are heading up. But now people need to understand how to do financial planning for the year 2021,
So, here are let’s learn some quick tips for financial planning for 2021:
Make financial resolutions for 2021 and stick to it
Try to be consistent in your daily routine and reap the benefits of loyal maintenance of your resolutions. Also, the person could build a budget that may be designed to help achieve some goals such as:
- Tax saving
- Retirement planning
- Vacation planning
- Emergency fund arrangements
- Wealth building for the long term
- Cutting back on unnecessary spending and shopping etc.
Maintaining a budget is difficult but it is always recommended to build a financial budget to ensure that at least 3 financial goals are achieved. Sticking to the budget is very easy and there are also some tools and apps available for your help.
Some people usually list tax planning as last-minute investments. Not all tax-saving instruments are made for everyone’s investment goals. So keep tax planning in your list and do focus it as much as you focus on other expenses.
Setting financial goals helps to plan better financial planning. Ideally, financial planning is divided into 3 types of goals:
Short Term Goals
Tax planning is usually the short-term financial goal. Short Term goals cover 1-3 years.
Medium Term goals
The medium-term goal maybe buying a house or school fees till graduation. Vacation planning can also be considered in the medium-term goal.
Long Term Goals
Retirement planning can be the best examples of Long term financial planning. Investments having longer payment periods expected at a much later date than 10 years will come in long term goals.
With COVID 19, in the year 2021, we can be witnessing some ups and downs in the health security area. Following points to ensure your safety and preparation in the health sector.
- Revisiting the medical insurance coverage
- Check whether the current insurance cover is sufficient to cover hospital admission, room rent, etc.
- Check whether the medical insurance covers the major and terminal diseases
- Understand that it is better to pay the premium now and reduce the bigger cash flow at the time of the actual incident.
Take care of your health
Learning from the year 2020, If we have good immunity, then we can save ourselves from multiple diseases and in it require some of the money expenses too. Such as yoga class, Gym, healthy jog. Try to break the routine of Work from Home and try to get out for fresh air. Doing this will reduce mental stress and as well as add to the health benefits.
Revisit the retirement plan
With COVID 19, people saw the actual job loss and pay cuts. This indicates that how critical it is to ensure to revisit our retirement planning. While people can assess the retirement plan, here are few things to keep a check on:
- Inflation factor
- Increased expected medical expenditure
- Reduced pay or no income in some cases like liquidity crunch etc.
Create an Emergency fund
Everyone knows that a fund equal to six months of the income should be maintained as a liquid investment so that it can be used when there is no active income source. Moreover, an emergency fund can be created by investing in short-term fixed deposits or recurring deposits, or mutual funds.
Learn something new
Learn something new can help people in getting an increment in the current job or a new job or promotion anything. Learning a new skill may also help to add an income stream that can be used as an emergency fund.
Strengthen your credit score
Try to pay loans with the highest interest rate first. Also, avoid buying things on credit cards. Once people will get default on loan repayments, it highly affects their credit score. Always make sure that you are not defaulting on repayments.
Say no to unnecessary investments and tips
Most investors usually make investments based on insider tips or commission agents’ advice. Always take the advice from a professional if you can not do it yourself.
These 10 Tips will help people out in building a useful financial plan for the year 2021. These quick tips will help to strengthen financial health in the upcoming years. People will also need to ensure to stick to the Financial Resolutions to make it worth it.