Happy new year and good riddance to 2020. After 9+ months of non-stop pivoting on just about everything in life, I’m pretty excited for 2021. Sure, we’re still months away from vaccines becoming widely available, and it might be months beyond that before we begin to feel any normalcy in our lives. Regardless, Mrs. FIM and I are optimistic about 2021.
But before we dive into 2021, I want to take just a moment to look back on 2020.
Last year was quite an emotional roller coast for Mrs. FIM and myself, as I’m sure it was for most people around the world. There were plenty of difficult moments for us, as well as times when we were genuinely happy and content.
Personal highlights of 2020:
- Building shelves for our kitchen. No baseboard radiator will stop us from having shelves!
- Starting an LLC and a non-profit organization.
- Learning how to cook and master food prep. Thanks Budget Bytes!
- Paying off the remainder of our debt.
Screw you baseboard radiator. I defeated you.
Personal lowlights of 2020:
- Having to cancel our honeymoon to Hawaii. A trip we finally booked after 3 years of marriage.
- Not being able to visit our families.
- Another unsuccessful year of trying to get pregnant.
- Worrying about job security.
When I reflected on these high and low moments of 2020, I realized our happiness was directly correlated to the amount of control we had with any given situation. The best moments came with a feeling of complete control, while our worst days were accompanied by an overwhelming sense of no control.
Understanding this connection, we’re ready to do everything we can to be in command of our lives in 2021. I believe this starts with our finances. Having control of our financial situation gives us power over other areas of our lives.
So without further ado, here are our financial new year’s resolutions that will help us stay in control.
Sticking to our budgets
In last week’s post, I discussed how we successfully tracked all of our expenses in 2020. This year we set monthly budgets in each area of spending. Sticking to our budget will ensure that our savings rate stays on track.
Max out our 401(k)s & Roth IRAs
Last year we were on track to do this, but when the virus hit, Mrs. FIM and I were both in a vulnerable position with our jobs. We had a 2-month emergency fund but recognized we could both be temporarily or permanently laid off. Because of this, we reduced our 401(k) contributions to build up our emergency fund.
Important note: We continued to contribute enough to our 401(k)s to get the maximum match offered by our employers. If you have a job that offers a 401(k) match and you aren't taking advantage of it, stop reading this immediately and switch your contribution amount. You are losing free money. If you don't know if your employer offers a match, stop reading this and find out.
Fortunately, we didn’t lose our jobs. Mrs. FIM's job was cut to 50% in July, but all things considered we were able to get through the year unscathed. And with a vaccine being distributed, we feel confident in our job security moving forward. Because of this, we’ll increase our 401(k) contributions and contribute the max to our 2020 and 2021 Roth IRA’s.
Another important note: You can contribute to your 2020 Roth IRA up until April 15, 2021. If you have money you were planning to invest in a Roth IRA, start with 2020.
With us keeping our jobs, our emergency fund is bigger than we need it to be. We were okay with this during 2020, because we were preparing for the worst. But we also had a plan for that cash if the worst never happened. Which leads me to our next two goals for 2021:
Buy a used car in cash
One of my biggest financial mistakes was leasing cars for the past *gulp* decade.
I feel ya, Gob.
Our current (and final) lease expires in May. We’re in the process of looking for a used car to replace it. We want to pay for it in cash and eliminate another monthly expense. And hopefully we find something that lasts at least ten years.
I’ll be sure to keep you updated on our adventures in car shopping as things develop.
Buy our first rental property
We also are looking to invest in a rental property this year. Last year, we enrolled in Paula Pant’s course, Your First Rental Property. I highly recommend this course if you’re interested in this as a potential investment opportunity.
Our goal with purchasing a rental property is to build our passive income stream. Again, I'll be writing more about our experience with this later in the year.
Setting your goals
I encourage you to come up with resolutions and goals that will help you take control of your life. Be reasonable and realistic. Don’t set yourself up for failure. For example, if you have credit card debt, there are various goals you can set to pay off that debt:
Goal A: Pay off all credit card debt
Goal B: Pay off 50% of credit card debt
Goal C: Pay at least 5% of the principle each month
Goal D: Stop using credit cards for future purchases
Goal A should be the endgame for anyone with credit card debt, but perhaps you feel it's too big of a hurdle. You have $10,000 in credit card debt and only make $30,000 a year. Maybe Goal B is more realistic. Knock out half of your credit card debt this year and tackle the second half of it in 2022.
What if you’re struggling to pay any of the principle each month? Goal C could be a good plan to start chipping away at that principle.
Or maybe you’re not even thinking about getting out of debt, but rather stopping your debt from growing further. Great, use Goal D and close those financial flood gates.
Be reasonable with your goals. Don't set yourself up for failure.
Any of these goals are wonderful for tackling your credit card debt, but you’ll need additional resolutions to assist with this. Simply stating “I’m going to pay off my credit card debt” doesn’t make it happen. Come up with a financial plan to know where you’ll get the resources to pay off the debt. You can do this by reducing your spending and/or increasing your income.
Here are some random examples to help get you started.
Reduce Spending
Track your expenses and fix areas of overspending
Eat out only once a month
Brew coffee at home
Cancel one of your media subscriptions (Netflix, YouTube Music, Hulu, etc.)
Buy generic household supplies instead of name brand
Ride a bike to work
Make your own holiday cards
Shop cable/insurance companies for a better deal
Increase income
Ask for a raise
Start a business
Find a side hustle
Rent out a spare room in your house
Airbnb a spare room in your house
Sell unused items or furniture
Sell your second or third car
Planning out small goals like these can help you tackle those bigger resolutions. Just remember, your goals should be about taking control of your life. Be intentional and enthusiastic!
The hardest part is getting started. So comment below with your resolutions for 2021, then take your first step in achieving those goals!
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