A new year is here and so are your resolutions! If you set some financial goals for 2021, then avoid these five common mistakes!
1. Setting too many goals.
Too many goals that require too much time and effort will overwhelm you. When you’re overwhelmed, you lose motivation. Avoid this feeling by reflecting on where you’re at and what’s important to you. Then pick a specific goal, like saying up three months of living expenses or paying off a certain amount of debt. Focus on making progress on your particular goal.
Make sure to incorporate short-term goals in the next 30 to 60 days to make the goal more attainable. When it’s broken down in shorter terms, you can see the tangible results and stay motivated to reach the bigger goal.
2. Paying off so much debt that you don’t have a savings
While little to no debt is great, don’t let this goal consume you. People will often use any extra money to pay off past debts before deciding to invest in the future. Instead, save the extra money to have on hand when unavoidable expenses happen like medical bills or replacing broken items. Additionally, if you have savings to tap into, this could prevent you from taking on more debt.
The plan should be to pay off debt while also saving enough cash for a month’s worth of living expenses. Set up automatic transfers from your checking account into a separate savings account when you get paid. This autopilot choice will quickly add up.
3. Forgetting about bills.
Budgeting needs to include one-time expenses, like holiday shopping. So to avoid that surprise expense at the end of the year, start saving now to make it more manageable later. Saving a little bit every month is more manageable than paying several hundreds of dollars once at the end of the year.
4. Forgetting about taxes too.
Believe it or not, taxes can catch you off guard. Avoid withholding too much where your paychecks are smaller. But, avoid withholding too little so that you’re not hit with a hefty tax bill at the end of the year. It’s smart to research what taxes you will pay or get back to avoid a surprise for yourself, and sometimes, your wallet.
To do this, take advantage of the IRS calculator to help you understand what you’ll owe in taxes or how much to expect in your tax return. Then, make updates on your W-4 form. This tells your employer how much tax to withhold, as needed, to match the IRS calculator.
5. Making emotional investment decisions
When the market or economy becomes unstable, you may be tempted to skip or delay your investments. This is almost always a mistake.
Don’t try to predict what the market will do or where you think it’s going. Instead, think long term and check your emotions during the highs and lows of the market. So before making a hasty decision, take a breath, and evaluate the changes and risks you’re considering making.
Hopefully, after these tips, you’ll be successful in reaching your financial resolutions. If one of your financial goals this year is to be a homeowner, contact me to start your journey today! Call me at (512) 563-5550 or email me at firstname.lastname@example.org.