This past year hasn’t been easy for just about anybody. The COVID-19 pandemic, historic job losses, racial unrest and a turbulent election season made for an incredibly challenging year, including on our wallets.
In October, the Congressional Research Service, part of the United States Congress, estimated that half of all U.S. adults live in a household that has lost some employment income since March. After so much adversity where even the best-laid plans ran into roadblocks, it can feel impossible to plan — and budget for 2021. But it’s possible.
As we (thankfully) wrap up 2020, now is the time to take a deep dive into your financial health. How have your earnings fluctuated? How has your spending changed? Have you added more debt? It’s critical to assess your current financial situation, so you have a starting place as you determine your budget for 2021.
As you look at your finances over the past year and find that you need some help, look for it. There are local, state and federal programs that are aimed at helping people get back on their feet, including mortgage and housing assistance. Credit card companies also are offering some relief, including waiving late fees and lowering interest rates. And some lenders may even help you out if you have trouble making your car payments. We covered some options in an earlier post on how to get financial relief during COVID-19.
We all should have some form of an emergency fund for when we run into any number of life’s surprises. It might be a job loss, medical issue, a broken water heater or an unexpected car repair.
If you’ve had to dip into your savings in 2020, next year is the time to build it back up if you’re able. If it remained untouched, 2021 is the year to keep building it up. And if you don’t have an emergency fund, lessons from 2020, when so many unexpected events happened, should be a reminder that now is the time to create one. As you budget for 2021, make sure to include some strategies for starting an emergency fund.
The Consumer Financial Protection Bureau has tips for how to build an emergency fund from scratch.
Often, when we build budgets, we focus on our expenses. But we shouldn’t forget about ways to boost our own earning potential too. Some people sign on for side hustles to bring in extra cash to help cover household expenses.
But there also may be opportunities within the company or industry where you work. Could a new certification or skill net you a promotion or extra responsibilities with a nice pay raise? Check in with your boss to find out what skills could help launch you into the next phase of your career. If you’re lucky, your employer may even cover the expenses of that extra training.
As you budget for 2021, you will need to consider your daily expenses, debt repayment and emergency fund needs. But it’s also important to not forget your dreams for the future. That might include putting away money in a college fund for your kids and saving for a happy retirement for you.
We’re all probably more than happy to say, “so long,” to 2020. It’s been a stressful year. So, as you map out plans and budget for 2021, remember to be kind to yourself too. Take regular walks. Enjoy some at-home spa treatments. Find ways to spend time with your extended friends and family virtually. We’re all going to need a bit of a reboot in the new year.
If you are experiencing financial difficulty and are looking for a solution, non-profit credit counseling can help you make sense of all your options. Contact us today for a free financial assessment with one of our certified credit counselors.
Consumer Education Services, Inc. empowers people to overcome their financial challenges and lead financially-healthy lives.
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