What financial resolutions are must-dos in 2021? David shares the first three actionable steps to take to benefit your financial future.
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As we kick off the new year, let’s look to some financial resolutions. Have you set resolutions for the year yet or are you feeling a bit of the 2020 burnout? These resolutions are really important to your financial future–so important, that this will be a two-part series. Hopefully by the end of January, you have all seven of these action steps nailed down.
No matter what stage of life you are in, everybody needs to establish an emergency fund. Whether you suddenly need a new set of tires or computer or are suddenly without a job, having this fund in place ahead of time will keep you from running up credit card bills. Having money in reserve will add a level of confidence to the way you can carry out your financial life. How much should you have saved? How might you think differently about your life if you had the safety net of an emergency fund to support you?
Make sure you pay off your credit card debt every month. There is almost a trillion dollars in credit card debt in the U.S. today. David thinks of credit card debt like rust on your car or termites in your home. If you only make minimum payments, do you know how much you’ll be paying in interest and how many years it will take? If you know you can’t pay something off with your credit card, don’t buy what you think you want to buy.
When it comes to debt, is getting a car loan just as bad as credit card debt? What about a mortgage? Once you have an emergency fund and you don’t have credit card debt, is this a smart decision? David says if you’ve got to have debt, it may as well be on a piece of real estate. A car loses value every year whereas most homes are an appreciating asset. You add to your net worth while paying down the debt on your house.
The third resolution is aptly called, cover your assets. Whether you are in your 30s, 50s, or 70s, you want to insure your family against catastrophic risks. What are the risks? David talks through a few examples of what the difference having life insurance could mean. Make sure your family is able to carry on financially if something were to happen to you.
We’ll talk about resolutions four through seven next week, but between now and then, we’ve got a bit of homework for you. Have you done a net worth statement yet? It’s one of the best tracking mechanisms you can use to make sure you’re on track to achieve your financial goals year after year. Be sure to fill it out and then come back next week for part two in this series!
Listen to the entire episode or skip to a particular resolution using the timestamps below.
[1:25] – What are some financial New Year’s resolutions you can make?
[4:05] – Resolution #1: Do you have an emergency fund?
[8:54] – Resolution #2: Pay off your credit card debt.
[14:10] – Is a car loan or mortgage okay to have?
[16:21] – Resolution #3: Cover your assets!