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Jan 7, 2021

Get Your Finances in Order with Stash’s 2021 Checklist

By Stash Team

Tips to help you examine your budget, save, and pay off debts.

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The new year is the perfect time to turn over a new leaf when it comes to your personal finances. 

You might want to start saving, or increase the amount that you normally save. Or maybe you want to pay off a big debt, such as your student loans or a credit card balance. Or you may want to make a big purchase, like a car or a house. Whatever your financial goals are for the new year, it helps to have a plan. 

With that in mind, we created a checklist to help you get your financial house in order in 2021.

#1 Revisit your budget

If you don’t have a budget yet, your first step should be to consider building one. Your budget will help you take stock of how much money is coming in each month, how much is going out, and how much is available for saving and investing. You might use the 50-30-20 budget, the envelope method, or the zero-sum budget, as three examples.

With the 50-30-20 budget, you’ll figure out how much income you earn per month and then divide that money by percentage: 50% for essential, fixed expenses, 30% for nonessential, variable expenses, and 20% for saving and investing. 

If you already have a budget take some time to think about how your income or expenses may have changed in the last year. You may have gotten a raise or changed jobs. Or you may have lost your job or been furloughed due to Covid-19. Consider how these factors may affect your monthly income and expenses, and change your budget accordingly.

#2 Set your savings goals

As uncertainty caused by the pandemic continues into the new year, now is the perfect time to shore up savings if you can. First, you’ll want to make sure you consider creating a rainy day fund and an emergency fund, or are working towards building them. 

Your rainy day fund, which you might consider keeping in an easily accessible bank savings account, should have between $500 and $1,000 in it. You can use this money for an unexpected expense, such as a car or home repair. By contrast, an emergency fund should contain more money, about three to five months’ worth of expenses, to carry you through more significant setbacks, such as a  job layoff or costly health emergency. You might want to keep this money in an account where it can earn interest. 

If you have goals for 2021, such as buying property or going on a vacation (once pandemic restrictions are lifted), you might want to set up a way to save towards that goal. You can create partitions within your Stash account for specific saving objectives. If you’re expecting to receive a stimulus check and you don’t need to use it for everyday expenses, you may want to save it for a rainy day, or some other long-term goal.

#3 Check your retirement savings

While retirement might seem far in the future depending on where you are in your life and career, it’s never too early to think about saving for retirement. If you have a retirement account such as a 401(k) through your employer or an individual retirement account (IRA) on your own, you should look at where accounts stand at the beginning of the year. If you can make or increase your regular contributions, consider doing so.

Or if you don’t yet have a retirement account set up, think about doing so. With Stash Retire, you can open an IRA and start saving.1 Think about what your retirement account could look like in a year if you start adding to it now.

#4 Evaluate your debts

Make a plan to tackle debt in the new year if you find yourself overwhelmed by it. Try to pay your credit card and other bills in full and on time in the new year so that you’re not adding to any debt you already have. 

To get on top of big debts, account for debt repayment in your budget. And find a strategy to eliminate it, such as the avalanche or snowball method. With the snowball method, you’ll start by paying off your smallest debts first and then move on to bigger ones as you build confidence. When you use the avalanche method, you’ll start with the debts with the highest interest rates and move down the list so that those debts don’t have more time to accrue interest.

#5 Diversify your investments

If you aren’t regularly adding money to your investments, consider scheduling incremental investments. You can use Stash’s Auto-Invest to automatically make contributions to your portfolio on a weekly or monthly basis. 

You might already be investing regularly. In that case, take a look at your portfolio and see where you have room to diversify. While investing always involves risk, buying a mix of stocks, bonds, and ETFs can help protect your portfolio from risk. Use Stash’s portfolio diversification analysis tool to get recommendations on how you can diversify your portfolio. 

#6 Consider getting insurance

Insurance—whether it’s life insurance, home insurance, or health insurance—can provide essential funds for you, your loved ones, or your property in the case of a loss or other emergency. As 2021 begins, make sure that you have the right policies for you. If you don’t have something you need, consider getting new coverage or updating any current policies.

#7 Stay informed

Stay up-to-date on the economy and business news with Stash Learn. Following the news and learning about personal finance can help you grow as an investor. Subscribe to our newsletter, The Wallet, to get the latest stories and financial guidance.

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Written by

Stash Team

1Stash does not monitor whether a customer is eligible for a particular type of IRA, or a tax deduction, or if a reduced contribution limit applies to a customer. These are based on a customer’s individual circumstances. You should consult with a tax advisor.

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