The year 2020 has been really exhausting – and not just mentally and physically. Under pandemic restrictions, many of us had to dig into savings and investments to sustain our day-to-day. Now that we are moving into the new year, we want to make some changes to our financial strategy.
If you’re like us, you’re worried about how to successfully stay under-budget, make sustainable and profitable investments, and diversify your portfolio in 2021. What will be the best tools to do that? What are the financial trends of 2021? Let’s find the answers below.
Organizing your personal finances in 2021
Indeed, you cannot control the entirety of your financial life. But You can safeguard yourself from the impact of uncontrollable events or financial emergencies. Changes in tax law, inflation, healthcare costs, unemployment – these are some things that are not in your control.
However, you can assess the impact these events will have on your personal finance and make room for such emergencies. This is a part of organizing your personal finance, in addition to sticking to your monthly expenditures.
How to achieve financial success in 2021
Did you know that money lying in your savings account is causing you more losses than gains? Equity, debt, gilt, foreign equity, gold, land – these are some of the things that increase your money’s value. What’s more – investing in multiple areas helps you limit your portfolio’s impact in case of market upheavals.
Instead of focusing on’ how much I can spend,’ think of ‘how much can I save.’ Calculate the savings rate you need to have monthly or annually, which can eventually help you achieve your long-term financial goal, whether financial success, independence, or retirement.
2021: A Year of Growth
According to World Bank, the global economy is set to expand by 4% in 2021, primarily when policymakers focus on implementing investment-centric and investment-friendly reforms. The collapse of the worldwide economy in 2020 is less severe than projected because of the advanced economies’ robust recovery actions.
Though this growth is more likely to pick-up in the second half of the year, it will be uneven across sectors. The focus will shift from fighting the pandemic to up-skilling and creating more jobs globally. Make 2021 a year of growth for yourself. Invest more resources in learning new skills that increase your employability and thus lead you to financial success.
How to manage your money effectively
There are only three steps for managing your money more efficiently. First, understand your core values. Do you enjoy the idea of a financially secure future? Or do you love investing in new experiences and making the most of them now? Prioritize your expenditures according to it.
Chances are, you are somewhere in between those scenarios. In this case, you can easily manage it by reducing your emotional or ant purchases. Before buying small or large things, think about how much you will use them, how beneficial they are, and then move forward accordingly. You’ll be surprised by the clutter you can cut out from your monthly expenditures just by thinking twice.
Goals establishment for the whole year
Being financially successful in 2021 will be a different ball-game than the previous years. Let’s look at a few goals you should establish for yourself to manage your money in 2021 successfully:
- Clear debts on time – not only does it relieve you mentally, it. Adds to your credit score. A good credit score will come in handy in case of a financial or personal emergency.
- Multiply your money – History has shown that stock markets are always on the rise from a long-term perspective. Do your research, invest in a stable growth share that helps you multiply your money.
- Invest in retirement – Most retirement investments and pension schemes require a small monthly amount from you. Make it your 2021 goal to cross the retirement plan threshold and secure your future.
- Invest in financial education – It’s not just you – most of us are scared because of the lack of financial knowledge. Take the time and money out to buy yourself an online course on financial literacy.
- Invest in insurance – Don’t confuse insurance as an investment on which you’ll reap regular returns. Think of it as a solid foundation to have in case of emergency, and choose a plan accordingly.
Support yourself with tools that help you stay organized
Now that we are used to doing everything on our smartphones, we can add a few apps to our ammo for being financially successful. Here’s a few of them:
- Budgeting and purchase tracking app like Mint. With such an app, you can see your expenditure trends and then tweak your goals accordingly.
- A credit score review app like Credit Karma. You should see a graph of your credit score over time and compare it with that of others in your age/income group.
- A financial literacy app like You Need a Budget (YNAB). You should be able to quickly access information that applies to your income group and investment portfolio. Invest in an app that is easy to understand and doesn’t complicate the idea of financial literacy.
Financial trends for 2021
The fintech industry is rapidly reacting to the trends of 2021. Here are a couple of crucial trends to watch out for:
- Collaboration over the competition- ecosystems are being created where multiple firms work together to create a better solution, for example, the Open Banking system, which allows firms to access customer data to develop smarter products.
- Automation and embracing technology- more and more financial institutions will be moving to automate processes and provide a streamlined experience. Technology will be an even more critical tool to give a customer-first experience and become cost-effective.
Whether it is large firms or small households, everyone aims for sustainable growth, fiscal stability, and security in the year 2021. Managing money successfully is not rocket science; however, it is easy either. With a few hours every month and a couple of tools, you can transform your money to ensure a reliable and secure future.