About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C. area, that works with clients virtually across the country. Lamar's work with his clients focuses on budgeting, employee benefits, paying down debt, buying their first home, and investing. Lamar is the Founder of Dream Financial Planning, a virtual financial planning firm specifically designed to help young professionals and minorities take control of their finances and fulfill their dreams. Feel free to schedule a complimentary consultation to learn how we use The DREAM Financial Planning Process ™ to help our clients achieve their goals.
2020 has been quite the year, to say the least. With only one month left, everyone is ready to put the year behind us and try to start fresh. From the coronavirus pandemic to economic shut downs, many have felt the financial strain. If you are looking to start 2021 off on a better financial note, these seven moves will (hopefully) help make your year less stressful.
Financial Move #1: Spend Smartly
Make your 2021 mantra an easy one: spend less, reduce stress. Before you buy, ask yourself "will this actually improve the quality of my life?". If the answer is no or if it will just add clutter to your home (which can also add stress) then skip the purchase.
You can start small, by doing things such as:
- Foregoing your morning latte and brewing a pot at home instead
- Cooking at home rather than going out to dinner
- Not buying new clothes regularly
- Checking for a new phone plan
- Waiting a few days and really considering each purchase to limit impulse spending
The above things can become a lifestyle change and something that you can implement into your everyday life.
Financial Move #2: Reduce Debt
Getting rid of, or at least reducing, your credit card debt can relieve an immense amount of financial stress. Start by paying off the credit cards that have the highest interest rate before working your way down the line to lower-interest loans. Making small changes can start becoming more of a lifestyle, therefore making it easier to reduce your debt.
Financial Move #3: Track Expenses
If you track exactly where your money is going, it will give you a greater idea of where your overall financial picture stands. Simply understanding where your money is going can help you to really own it, which in turn, can start to reduce financial stress.
Financial Move #4: Trade “Stuff” for Experiences
While you are still spending money here, research shows that people enjoy experiences more than possessions, so this is a great way to make better use of our money. Rather than buying a new outfit, you could spend your money on:
- Cooking classes
- Traveling (when safe to do so)
- Art classes
- Spending more time with friends and family
Whatever it may be, this will prevent stress and burnout while providing you with positive memories.
Financial Move #5: Read Financial Success Stories
Simply reading success stories is a great way to change your mindset when it comes to a healthier financial lifestyle. If you read about people who have been in your situation and were able to pay off debt, start earning more money or just overcome some type of financial hardship, then you can become inspired and start to implement these tactics into your own life.
Financial Move #6: Create an Emergency Fund
It can be difficult to comprehend creating an emergency fund when you are already financially stressed. But whenever you can, put any extra money aside at the end of the month into an emergency fund for unexpected expenses, such as house repairs, car repairs or healthcare costs.
Financial Move #7: Start a Spending Plan
Once you’ve worked diligently to reduce debt and build an emergency fund, start a spending plan. When you do this, you’ll need to track your income while making a plan for all that you are earning. You can prioritize your spending once you have allocated the funds to cover expenses. This should hopefully help you breathe a little easier as you spend money while staying on track.
2020 has been hard on everyone, personally, professionally and financially. As we prepare for the upcoming year, use these tips to help reduce financial stress as we all work towards a better year.
Dream Financial Planning Process ™
Whether you're managing student loan debt, starting a business, or considering buying your first home, the DREAM Financial Planning Process™ is tailored to the unique needs of busy professionals is their 30s and 40s. This process focuses more on short-term goals while you grow and evolve in your personal and professional life. If you're looking for guidance on: Financial Planning, optimizing employee benefits, budgeting, student loans, and managing your 401k or investments we can help.
With uncertainty surrounding the economic stability of our country, it's okay to have fears and anxieties surrounding your own savings and investments. The most productive course of action from here is to reach out to Dream Financial Planning (or whoever your trusted advisor might be) and discuss your options. It's easy to have knee-jerk reactions when it feels like the bottom is falling out, but it is imperative to make decisions using research-backed data and a level head. If you'd like a Complimentary Review and risk assessment of your investment portfolio feel free to send me an e-mail.
On the first Thursday of every month I send out a monthly newsletter with tips and tricks to help you manage your finances. In the November Newsletter, I discuss year end goals, open enrollment, and the best way to manage your 401k.
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Disclaimer: Dream Financial Planning, LLC does not warrant that this information will be free from error. None of the information provided on this website is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall Dream Financial Planning, LLC be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the materials in this site, even if Dream Financial Planning, LLC or a Dream Financial Planning, LLC authorized representative has been advised of the possibility of such damages. Please consult with your own advisor before making any changes to your Financial Plan, Investments, or Insurance coverage.