2020 has been a tough one with facing a lot of challenging situations, which led us to the button line. We made a lot of mistakes while making our financial decisions. Now is the time to have a fresh start and learn from those mistakes. Here are the common mistakes that we may have made in 2020 and have to avoid in 2021.
5 Financial Mistakes to Avoid In 2021
Here are the five financial mistakes of 2020; you cannot afford to repeat in 2021.
#1 Do Not Set Too Many Goals
Goals and resolutions may be more when it is less.
When we make too many goals, it makes us overwhelmed about our personal expenses. It would be best if you did not focus on paying off your student loans, credit cards and also saving for a house or your retirement. All the goals are important, but it is challenging to make progress when we are splitting our focus and resources.
Decide which one is more important to you and set a short-term goal—like, paying some part of your credit card dues. Make the goals for the shorter term. The intention is to focus on the next 30 or 60 days, definitely not the next 30 or 60 years.
#2 Include ‘Bills’ in Your Budget
It is super easy to slip off the onetime expenses from your mind, just like a vacation or holiday shopping. At the end of the year, we suddenly are like, “Oh! It’s Christmas! Let’s go shopping”. But the thing is we forget to include it in our budget.
So, start saving early for those budgets. In case you spent around $500 for your Christmas or other festive shopping, start to save from now.
#3 Do Not Forget About Tax
Tax season also comes with unwanted surprises. And it comes every year.
We have the wrong withholding conception. Whenever we withhold, it is too much or too little. Too much withholding gives you smaller paychecks, and you will lose the opportunity cost of gaining more amount of money in each paycheck. You were potentially investing and saving that money earlier.
Too little withholding will give you a surprise with the tax bill on the year-end. So, updating your tax filing may be a suitable option. It is up to you; either you are wanting a return or do not want to pay tax.
#4 Do Not Avoid Saving for Paying Too Much Debt
Clearing as much debt as possible may be tempting to other countries. But to clear out our previous debt, we often pay off all our savings as well. This leads us to take more debts. Always save for those unavoidable expenses. It is essential to save at least the amount of one month’s expenses. We always should have an emergency saving fund for those emergencies.
After all, we are human. There will always be something to grasp on your extra income. Maintain another saving account other than your checking account and transfer an amount of money at the starting of the month.
#5 Do not Make Emotional Investment
When the market is getting hard, it is customary to get emotional and get your investments. But often, this can be risky. It is best to keep your emotions aside and do not judge the market by your calculation. There were several instances when the market touched the bottom, and after some days, it hit back.
For example, the value of Bitcoin fell to $3,000 in the middle of 2020, and by the end of 2020, it hits the value by crossing $29,000. You can check more details on Bitcoin Power App. Yes, the market is volatile but try not to be reactive to that.
In this new year, make a resolution not to make the same mistakes and enhance your financial status. Plan appropriately for reaching your financial goal. Cut off the common mistakes of shopping too much, get too much debt, unplanned expenditures to get more outcome.
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