My Financial Resolutions for 2021

My Financial Resolutions for 2021

As is typical with a New Year, we often reflect on the previous year (here’s my reflections on 2020) and set goals, or resolutions for the New Year. Your resolutions will likely entail things like: eating healthier, less screen time, or going to the gym more, but I’d also encourage you to set financial goals. Getting better at your personal finance is also a habit that needs to be developed, and it takes the same goal setting, planning, and discipline to achieve them! Also, you’re more likely to be successful in achieving your goals if you a) write them down and b) tell them to a friend. By writing this blog post, I’m doing both! Here are my 2021 personal financial resolutions: 

Grow net worth by 25%

In setting goals, I think it’s important to set your eye on the prize. At this stage of my life as a not so young professional, I’m focused on growing my wealth. Mrs. Money and I are at a point where we feel we have our debt under control (just a loan for our house), we have an emergency fund and savings, and have good careers. Our main focus now is wealth generation. I’ve said it before and I’ll say it again – I certainly don’t want to work forever, and would like to retire one day, ideally at a younger age via an early retirement. To do so, it’s critical that we focus NOW on growing our wealth – both in and out of our retirement funds. It feels like we’ve spent the first decade of our young professional life getting the pieces in place, fine-tuning the machine and now it’s firing on all cylinders. Now is the time for us to grow and go! 

Big picture – I’d like to grow our net worth by 25%. We achieved this goal in 2020 and I’d like to achieve it again in 2021. I don’t really have a good barometer on how much young professionals should be growing their net worth year over year, but 25% seems both reasonable and like a good growth goal. We’ll do this by a) saving and investing in retirement, my employee stock purchase program and general investments, b) real estate appreciation and c) growth in our existing investments/savings. I always say that your money should work hard for you and I’m expecting mine to work hard in 2021! 

Photo by Jeremy Bishop on Unsplash

Focus more on investments vs. savings 

Interest rates right now are pretty rock bottom. My High Yield Savings Account (HYSA) started out in 2020 paying 2%, which was pretty awesome. By the end of 2020 it was down to 0.5%. Of course debt interest rates have fallen and I hope in early 2021 to refinance our house to get below 3% interest on our mortgage, but your money is not going to grow much at all (or keep up with inflation) in a savings account. 

In years past, I was pretty concerned with keeping my savings account balances high, but now I’m starting to reflect on WHY. Why should I keep my savings balances higher than they need to be when they’re not growing worth anything? In 2021 I want to re-shift my mindset – and keep enough in savings for the nearish term thing I need them for – buying a car (I always pay cash), house repairs/maintenance fund and the emergency fund. Outside of that I should focus more on investments – although they are riskier – I feel like if I can get anything more than 0.5%, which is what my HYSA is paying, the better off I am! 

Photo by William Iven on Unsplash

Get more realistic with my budget

I have this bad habit of setting saving/investing goals a bit too high for myself each month, and often find myself stressing at the end of each month over our budget. Life is not cheap; especially with a kid, and I need to do a better job remembering that I am saving 25% of my money (10% retirement…with a 6% match and 15% ESPP) and that I should be happy with that. I need to stop beating myself up over not saving/investing a whole lot more on top of that amount.

I previously did this to make sure I wasn’t getting too comfortable in my spending patterns and that I was pushing myself to spend less and save more. I think at this stage of life, spending (a bit) more is just gonna happen, and that achieving 100% of a smaller saving/investing goal is better than 50% of a larger goal. Ok, perhaps they are the same but I’ll feel better about hitting my smaller goal more often! To do that – I’m going to update my 2021 budget and decrease my saving/investing buckets, and increase my general living/fun buckets. 

Close or downgrade a few credit cards

I’ve got a bit of a credit card problem – and thankfully not carrying a balance and paying high interest on them – the problem is that I’ve got a few too many with annual fees. Right now I’ve got 5 credit cards in my name and those 5 cards have annual fees of $959. That’s a lot when I write it out and look at that number. There was a time in my life where I was able to justify that amount – it was just Mrs. Money and I, and we were travelling a lot. The free checked bags, early boarding, bonus miles, lounges and rewards came in handy, and we travelled well. However, it’s important for me to be realistic with myself and admit that 2020 (COVID) and a kid has drastically changed our travel habits. As much as I’d like to continue travelling as often as Mrs. Money and I did – it’s just not feasible. 

To that point, after much soul searching, spreadsheets and pros/cons lists, I’ve decided to downgrade/cancel 2 credit cards. Now of course closing a credit card isn’t super ideal as that can negatively affect your credit score (closing a credit card closes your credit line which reflects poorly on your score by not having as much of a credit limit). So – my plan is to definitely downgrade one (my Delta Amex from the $250 card to the free card) and close my Southwest card – but hopefully convince Chase to move my credit from that card to another one of my Chase cards. I’ve had a buddy successfully do it so I’m gonna give it a shot! 

$959 and 5 credit cards are just too much! I need to refocus my spending and perks that I get for what’s actually reasonable in my life. 

Save for 529

Going to college is not cheap, but the reality is that a good college degree hopefully leads to a good job, which will hopefully lead to a happy and successful life. One of the greatest gifts that my parents ever gave me was the ability to graduate from college debt free. I did attend an in-state public school, which made it more affordable, but it was still a huge blessing (thanks Mom and Dad!) to graduate without college debt. Now I know that not everybody was able to receive that gift and I know that there are still plenty of successful people that had/have student debt. For me, I’d love to be able to gift BabyMoneyFinance (BMF) the same gift and be able to pay for their college. 

To do so, I’m utilizing a 529 investment account, which is a tax-advantaged way to save for college. Here in Georgia, the plan that I have allows me to contribute to BMF’s college fund and those contributions grow tax free, assuming we use it for their college expenses. Even better, up to $8,000 is tax deductible on my Georgia state taxes! After doing some back of the napkin math, I’ve landed on a goal of contributing at least $4,000 each year for BMF to go to college. Assuming a healthy (and average) return, BMF will be able to attend an in-state, public university and graduate debt free. I don’t know how much college will be when it comes time to attend, or if $4,000/year right now is the perfect amount, but I’ve set this as my goal and am going to do my best to hit it! 

Save for the winter in the summer 

For whatever reason, every November I start hard core stressing about money. It’s no secret that the holidays are expensive – whether it’s gifts, or homeowner association dues, or random taxes/fees that always seem to pop up. I also haven’t done a great job budgeting for daycare, although I do put aside $5,000 through a FSA (tax free plan) at work…daycare is more than $5,000/year. Things always end up ok, mostly with us saving less in November/December, but in winter of 2021, I’d rather not be in this stressful situation. I’ve set a calendar reminder for myself in the summer to start proactively setting aside a little bit of money each month to keep for the winter. As the Game of Thrones show puts it – Winter is coming! 

Keep doing more of the same and stay hungry 

I actually struggled a bit in writing this post, and in reflecting I feel like it’s partly because Mrs. Money and I are doing a number of things correctly already. We’ve stayed out of debt aside from our mortgage, we’re both heavily saving for retirement, and have a good habit of balancing on spending with saving and investing. However, just because we’re in good habits now doesn’t mean we’re in the clear. I’d like for myself (and Mrs. Money) to continue focusing on the same rhythms and motions that we’ve had so far and continue growing and staying ‘hungry’ for more! I never want to get complacent or satisfied (perhaps until I’m retired on a beach somewhere) and want to keep the pedal on the gas! 

Summary

Resolutions are great – even if we don’t fully achieve them. I’m setting some financial ones for myself and hope that by sharing them with you that I’ll be more consistent and stick with them! I encourage you to set your own financial goals as well! Best of luck and happy 2021! 

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