Navigating life during the pandemic was ten times more challenging to those that are already drowning in debt. Now that the year is almost ending, and a vaccine is finally available, hope has risen, motivating people to restart their lives and prepare for the following year.
But instead of celebrating the return of the “normal”, and reverting to our old, sometimes destructive habits, we should apply the lessons we’ve learned in 2020. The most important of which are the financial realizations. Here are the new money goals we should strive for in 2021:
- Always Make a Plan Before a Major Expense
Many of us are guilty of buying things impulsively. Though most of those purchases are just small, like clothes, gadget accessories, or home decor, lacking self-control when it comes to spending can lead us to make major purchases without thinking it through. For example, if you get a windfall, you may immediately decide to buy a car, just because you can now afford it.
Let’s ditch spur-of-the-moment decision-making in 2021. From now on, always plan ahead before buying anything expensive, especially if you don’t really need them. A plan will make you feel like you’re working toward something, helping you gain more control of your impulses.
- Don’t Quit Your Job Without a Plan
If employed people still struggled during the pandemic, how much worse did the jobless do? Therefore, abandon another common impulse, which is quitting your job without having an additional source of income. Remember that quitting does not qualify you for employment insurance. So unless you have a side-hustle, a new job offer, or new job prospects, don’t turn in that resignation letter yet.
- Focus on Overdue and High-interest Debts
This couldn’t be stressed enough: Cut down your expenses, and prioritize eliminating your overdue and high-interest debts. Those bills grow rapidly, so pay them off as soon as you can before you cause a dispute between you and your creditors. Staying on-time with your high-interest debts allows you to maintain a good credit score, which defines your reputations among creditors.
- Be Honest With Your Creditors
If you’re short of cash and thus can’t pay off some debts, come clean to your creditors instead of evading them. They’d rather receive partial payment than none at all. Besides, your creditors can actually help you during a tight financial situation. They can reduce your monthly payment or interest rate (or both) as long as you express your willingness to satisfy your debt. These are called hardship programs, which many banks and credit card companies offer.
However, before entering a hardship program, you have to ensure that your monthly payment and interest rate actually decreases. Otherwise, you could be stuck with even a higher minimum payment.
- Sell Some of Your Assets to Avoid Bankruptcy
Don’t wait until you hit rock-bottom before selling off some of your assets. It may be difficult to part ways with them, especially if they hold sentimental value. But it will be even harder when a creditor seizes them from you.
If you can’t sell a specific asset, such as your house, because you don’t have anywhere else to dwell, consider refinancing your mortgage. This will replace your existing loan with one that has a lower interest rate and better overall terms, helping you pay it off easier. But qualifying may not be easy. You need to have good credit as well, and an income that proves your capability to repay.
- Prepare for Emergencies
Most importantly, take your emergency savings seriously. Spare cash that can sustain you for at least six months will help you stay sheltered, clothed, and fed during a crisis. Let’s not repeat the money mistakes we made in 2020, and let’s keep in mind that we really don’t know what tomorrow will bring.