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6 Ways to Get Your Finances in Shape for 2021

By Maurie Backman - Dec 21, 2020 at 11:00AM

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Want a successful 2021? Here's your ticket.

A household budget written out on notebook paper.

Image source: Getty Images.

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2020 has been tough for a lot of people not just emotionally, but financially. The coronavirus pandemic has battered a lot of people's finances, causing them to fall behind on bills and rack up debt. If you've been impacted by the pandemic -- or even if you haven't -- the start of a new year is a good time to get your financial house in order. Here's how to whip yourself into better financial shape in 2021.

1. Set up a detailed budget

Knowing where your money goes every month is essential to getting on track financially. And to that end, you'll need a budget. Your budget doesn't have to be anything fancy -- a basic spreadsheet will do. List each recurring monthly expense, as well as any expenses (like annual professional license renewals) that don't pop up monthly, but you need to pay for nonetheless. 

Of course, to account for all of your expenses, you need to comb through your bank account and credit card statements from the past year. But once you have your expenses mapped out, you can see where you're overspending and find ways to cut back. 

2. Automate your saving

Taking some of your paycheck off the table by sending it straight to savings is a good way to avoid falling victim to impulse purchases and to stay on track to meet your savings goals. Automating the process can help. With an automatic transfer, you arrange for a portion of each paycheck to move from your checking account to your savings account right off the bat. That way, at the very least, you won't fall short due to forgetfulness.

3. Identify "gotchas" that have hurt you in the past

We all have our weaknesses -- purchases that derail our savings plans and tempt us to spend money we shouldn't. Maybe your "gotcha" is takeout food. Maybe it's last-minute travel, or designer clothing items you love snagging on sale. No matter your personal weakness, figure it out ahead of time so it won't cause you to fall short on your goals.

You're probably thinking that means you can't indulge in that weakness. Not so. Rather, you need to incorporate it into your budget. You may have to make other sacrifices to do that. For example, if you really want to order takeout or delivery once a week, you may need to spend less on entertainment. The key is to understand where you're likely to go wrong in your savings efforts -- and work around it. 

4. Build a robust emergency fund

Unplanned bills can throw your budget off-course and land you in a world of debt. In the coming year, make it a priority to build a full emergency fund -- one with enough money to cover at least three months of essential bills. Your emergency fund should be kept in a savings account, where you'll have easy access to it. Investing your emergency fund is a no-no -- if your portfolio tanks right when you need a withdrawal, you risk locking in losses and falling short on the money you need. 

5. Get your debt under control

Maybe you racked up pandemic-related debt this year. Or maybe the holidays did you in. No matter the reason for landing in debt, establish and stick to a solid payoff plan to emerge debt-free (or as close to it as possible) in the coming year. Figure out which debts cost you the most, and see if it's possible to lower the amount of interest you're paying. Consolidating your debt via a balance transfer or personal loan could make it a lot easier -- and cheaper -- to pay off. 

6. Map out your most pressing goals

Maybe you want to buy a house by the end of 2021. Or maybe your primary goal is to save enough to take your dream vacation after a year of being cooped up at home. Either way, put that goal in writing and figure out what it takes to get there. And use your budget to help you achieve it. If your mega-trip will cost $3,000, that's $250 a month you need to sock away in the course of 2021. Adding that as a line item in your budget will help you shift other expenses around to make that trip happen. 

Your goal should be to close out 2021 on a stronger note than you start out with. Do your best to get your finances in shape next year -- you'll be thankful when you're able to celebrate your wins in time for 2022. 


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