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Whew, chile! If “doing too much” was a person, 2020 would be the poster child. The COVID-19 pandemic’s impact left millions of people out of work, with their hours cut, or with huge drops in their income. Families all over the world have been extremely affected by the pandemic and are desperately trying to recover.

As we kick off the new year, now is a great time to get your finances in order. Keep in mind you might not be able to check off every strategy this year, but as the viral car salesman Durell Smylie put it, you are well on your way to “where the money reside” with these financial strategies for 2021 and beyond.

Set a Spending Plan

Notice I didn’t say “budget”? There’s something about the word budget that makes people ready to square up like they’re in a middle school fight. Smart About Money offers tips on how to create your plan. You work hard and want to have a little something for yourself; we get it. Creating a spending plan gives you the power to choose what you will spend your money on instead of feeling like you’re being restricted to what you can’t have. Begin by determining your monthly fixed income, then determine what spending buckets are most important to you. Priority buckets will typically be rent/mortgage, utilities, groceries, and savings. After you’ve done your research and have determined how much you will need for your expenses, the next step is to create personal spending buckets, like an entertainment or travel bucket, that the remaining funds can go toward.

Mixed race woman putting money in savings jars

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Emergency Fund

In 2021, don’t live with regret. No, we’re not talking about telling the guy you’ve been dating how you really feel. That’s great too, but let’s stay focused on the subject at hand: your money. Murphy’s law states that what can go wrong will go wrong. For example, as soon as you pay off your car, something starts leaking or breaking down. So be prepared and make sure you establish an emergency savings fund. According to Nerd Wallet, you should make it a point to save at least $500. If you think you’ll be tempted to dip into your emergency fund, look into online, high-yielding savings accounts. Many online banks take a few days to get you your money, and hopefully, the delay in instant gratification will give you time to sit down, recognize you don’t need those shoes or new bags, and look to see what you have in your closet. Remember, you don’t have to stop once you reach your $500 goal. Keep it going, sis!

With online banking you can transact at anytime, 24/7

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Get Your Credit Right

Sorry to tell you, but finance companies don’t care if you’re a nice person when money is involved. They want to know if you’re a credit risk. If you’re thinking about purchasing a home, a car, or applying for a business loan, you need to make sure your credit is on point. Maybe you’re not ready to purchase a home yet, but even landlords and potential employers may decide to review your report to make their final decision about you. According to Experian, the average FICO® Score in the U.S. is 711.

To increase your credit score, you should:

  • Start lowering your credit utilization ratio.
  • Pay all bills in full and on time.
  • Do not apply for new lines of credit.
Black woman smelling food cooking in pan on stove

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Eat Out Less

“Hey, Alexa, find chicken recipes.” Listen, you know you have food at home, and your wallet does too. Credit.com suggests cooking more meals at home. We know that a lot more takeout was happening in 2020 due to limited seating at restaurants, but those $10 meals and delivery fees can add up. If you really can’t fathom cooking meals at home 100 percent of the time, consider a meal subscription service; you can budget it in as a grocery expense so you can have a bit more variety in your freezer and still end up saving money. Look at how much money you spent last month on takeout and see how much you can potentially save. Next, calculate your savings and consider putting those savings toward paying down debt or building up your emergency fund.

Female financial advisor in discussion with client in office conference room

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Plan for Retirement

Rebecca Lake, an investing and estate planner expert, suggests working with a financial advisor. Retirement will hit different when you have financial freedom. Meet with a financial planner to determine how you can boost your 401(k) contributions or other retirement plans. Start thinking about where you want to live. Will you and your forever bae travel the world? Do you want to live a somewhat retired life? There are a variety of ways you can increase your retirement savings. For instance, if your employer offers a 401(k) match, be sure to participate in the program; the more you pour into the plan, the more you will get in the long run. So go ahead! Start making your big money plan so you can become the rich, semi-petty auntie that everyone loves to ask for money (but don’t do that all the time).

Smiling African American woman with jar full of coins

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Invest

This is the year to start thinking about buying stocks, bonds, mutual funds, and other investments. If you’re serious about making your money work for you this year, then opening a brokerage account is the first step. How do brokerage accounts work? There are many benefits to having a brokerage account, one being that you don’t need a lot of money to get started. There are brokerage firms that will meet your budget, from low-fee online brokers to full-service stockbrokers. You own the money and investments in your brokerage account. There is no limit to how many you can have or the amount of money you can deposit into a taxable brokerage account each year.

Which option suits us best?

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Life Insurance

Life insurance is often thought about as a resource to pay for funeral expenses. While that is true, life insurance is more than just a monthly payment for what-ifs. It’s a gamechanger in how you can save and earn compound interest that helps your financial future. When you invest the cash component of your life insurance policy, you will not have to pay taxes on your investment’s dividends or capital gains. Speak with a financial advisor or life insurance agent and see how the “cash factor” of your life insurance policy can be invested now to protect your financial future.

Typical life insurance plans include:

  • Term life insurance
  • Whole life insurance
  • Universal life insurance
Woman Shreds Credit Card

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Pay Down Credit Card Debt

According to the Federal Reserve, consumer credit card debt continues to drop due to “consumers spending less amid the COVID-19 pandemic, as well as households paying down existing credit card debt.” If you have credit card debt, consider making it a goal to pay it off. There are a few ways you can pay down credit card debt.

A few suggestions:

  • Pay off your higher-interest debt first (known as the avalanche method).
  • Pay off your smallest amount of debt first (known as the snowball method.)

If you’re struggling with credit card payments, it might be time to call in reinforcements like a credit counseling agency, take out a personal loan, or settle your debt with the company.

USA, New Jersey, Jersey City, Woman paying bills via internet

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Pay Down Your Student Loan

College may have highlighted some of your most memorable moments. You met new friends, went on the road, became a leader on campus, or maybe you even met your spouse. And of course, you graduated, but with great memories comes a fairly large price tag for some. Yup, I’m talking about student loans. If you’re feeling overwhelmed by student loan debt, this is the year you get your game plan together. Here are a few ways you can pay off student loans quickly.

  • Make additional payments.
  • Pay more on the monthly amount.
  • Establish a college repayment fund.
  • Consider refinancing.
  • Apply for loan forgiveness.
Afro women decorating a cake at home

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Start a Business

If 2020 taught us anything, an extra stream of income always helps in uncertain times. Maybe you have a steady, full-time job, but you enjoy baking and people are always hitting you up for your to die for Bundt cakes. It’s time to start that business! Small businesses are popping up because people are starting to understand what they can do with an increase in revenue streams. Depending on the industry, contractors and freelancers decide how many projects they will take on and for how long. They have the flexibility to work a few days or a few hours a week and determine their rate of income. You’ll be amazed at your earning potential and support from your network.

Financial freedom is a marathon, not a race. Be sure to get advice from a certified financial consultant when investing and diversifying your portfolio. Last year was rough, so give yourself some grace. Today is a new day to begin your journey toward a financially sound future.

A word nerd and storyteller from the midwest, Michelle has a passion for working with brands that exhibit courage and creativity in finding new ways to advocate for and support causes/issues that affect black women. Think of her as your favorite quirky auntie, whose infectious laugh, calm presence, and warm hugs make even the most skeptical stranger feel like they’ve known her for a lifetime. Michelle has worked on more than a dozen film and television sets, ranging from live studio to narrative production and documentaries, created a children’s books series and founded a boutique copywriting agency to help hundreds of entrepreneurs and brands share their unique stories for optimal impact and influence.

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