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As we enter into 2021, everyone is hoping that it will be a year that holds a lot more promise than 2020. The COVID-19 pandemic derailed the plans of countless people across the world and in the United States. People lost their jobs, suffered pay cuts, and became a lot more conscious about their personal finance.
One-off events like the pandemic showcase how everything can turn on its head very quickly and you need to be well-positioned in advance to make sure that you can survive the impact of such an event happening again in the future.
Going into the new year, people will likely have all sorts of plans and New Year resolutions for a fresh start. One area that may be on your radar is improving your financial situation. However, this can be a daunting process as there are so many different factors and options to consider.
If you don’t know where to start but you would like to take action today to improve your long-term financial situation, then you can learn about four simple, but effective financial tips going into 2021.
Sort Your Monthly Budget
First and foremost, having a monthly budget in place can ensure that you are set up for success in your financial life. A lot of people just go about their day-to-day lives spending money at a whim and not really considering the overall picture. If you sat down with the average person and showed them exactly how much they were spending on food every month, for example, they would likely be shocked.
Before setting a monthly budget you need to analyze where you are spending your money at the moment. You should look at your expenses over the course of a typical month, breaking them down into different categories, such as rent, mortgage repayments, insurance, and groceries. This allows you to see exactly how you are spending your money in a clear-cut manner.
You may quickly start to see areas where you can cut back on spending or other aspects that need more attention. After conducting this analysis, you should then set some financial goals and targets. This will allow you to set up an optimal monthly budget that fits your situation. For example, you may have a target of saving $1,000 per month to build up a base of emergency funds or you may want to start investing a certain portion of income every month.
These goals will form the basis of your monthly budget. You should plan out your essential outgoings each month first of all. This might be rent, utilities, groceries, and savings. After this point, you can then start to fit in other things. A useful way to stick to your monthly budget is to automate your essential payments so you won’t be tempted to deviate from your plan.
This could see a certain amount going out of your paycheck each month and into savings account for example. It is important that you regularly review your monthly budget to make sure that you are still aligned with your goals and to make any necessary changes due to different circumstances.
Sort Tax Relief
Another key area that you can look at is any sort of tax relief that you can get. The tax code and all of the various rules attached to it can be quite confusing at the best of times. If you have had a tough year and you are struggling to pay your taxes, there are a few different ways in which you can seek tax relief, whether it is through an offer in compromise, an IRS repayment plan, or penalty abatement.
There are a lot of reputable tax relief companies out there that will be able to provide you with useful guidance on the subject, such as the Tax Defense Network, Community Tax, or Anthem Tax Services.
They will help to find the best solution for your specific taxation needs and to make sure that there are no issues that crop up that could be an issue. Make sure that you do not leave this to the last minute and add extra stress onto your shoulders. You should plan well in advance and meet all challenges in a head-on manner.
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Consider Debt Consolidation
If you have significant debt that you are trying to deal with and it covers multiple sources, then you might need to look into debt consolidation. This can be a way for you to add all of the debt together into a single sum through the likes of a debt consolidation loan. A lot of the time, this can help to lower the overall interest rate on your cumulative debt
You can use this approach for all types of debt, with many debt consolidation advisory companies out there being able to help you figure out what the best approach is for your needs. If your bills are out of control.
You struggle to meet the minimum credit card payments or you don’t have an end date on your existing debt, consolidation might be the best strategy for you. Make sure that you do your research and only go down this route if it makes sense. Look at all of the available options and see if you can save significant sums by taking this approach.
Manage Your Monthly Subscriptions
One of the quickest and easiest ways to save some money that leaks away on a monthly and yearly basis is by taking a look at all of your regular subscriptions. When signing up for different services such as Netflix and Spotify at the time might seem like significant sums, but these costs can really add up over time as you add more and more subscriptions to your monthly expenditure.
You should look at all of your subscriptions to see what can be eliminated. A lot of people will be surprised to see that they are still subscribed to services that they haven’t used for ages, but they forgot or did not get around to canceling the subscriptions. By doing a quick clean-up of your subscriptions, you can easily save hundreds and even thousands of dollars every year.
Conclusion
If you are looking to get your financial situation in control in 2021, then you can take a look at one or more of the above tips and start to incorporate them into your financial planning. This can be a game-changer for you going forward and help you set yourself up for long-term success.
It will also help you take back some control and reduce the stress associated with your financial situation. No matter if it is tax relief, debt consolidation, or a monthly budget, a fresh start in 2020 using these tools can set you up for a stellar year.
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Andrew is a freelance writer who has been crafting valuable pieces of content relating to personal finance for more than five years. Previously, he studied Economics & Finance at university and he has professional qualifications relating to financial advice.
