What is your financial game plan for 2021?

What is your financial game plan for 2021?

Welcome to a new year of financial opportunity!

But now that you are here, are you ready for it?

The task of planning your financial year is important not only for the beginner investor, but to the seasoned professional as well. So whether you’ve been taking control of your finances for some time or you are just starting to invest, there are some points that should be on your mind.

It can be deceptively simple. None of these steps are overly complicated, and may indeed seem a bit obvious, but they do require you to act on them. All it takes is to take one step at a time.

#1 Review your expenses

Do you know where your money went in 2020?

It is a very simple question, but one that is more complicated to answer than at first seems, and for a large number of people too. Past behavior is a good indicator of your routines and habits, so it really pays to be aware of it.

For that, you will need to go over past statements, one by one, and track as accurately as possible what were the expenses that impacted your budget.

From there, it’s a matter of categorisation. How much did you spend on basic necessities? Were there any unexpected expenses that you were unprepared for?

Doing this process alone could reveal clues as to where you can improve. You could be surprised by how much you actually spent on those little things you don’t even think about. There could be an opportunity to increase your savings or your investments.

You may realize that you have more money than you think.

#2 Project your expenses

Based on your findings from the previous step, what can you expect your expenses to look like?

Here it is important to include not only recurring expenses, but one-time payments as well. These could be large sums, such as annual insurance, or smaller ones, like Christmas and birthday gifts.

Having a specific category for the unexpected can prove to be valuable. It’s as they say: unanticipated events will happen, you just don’t know when. And considering that 1 in 3 people in the EU are not prepared for unexpected financial expenses, you should ensure you are on the safe side of the divide.

Let’s be clear – a category for unexpected expenses should be in addition to an emergency fund. If 2020 taught us anything, is that this is not optional.

#3 Project your income and bring it all together

You’ve done your homework on the side of your expenses – now it’s time to do it with your income.

By having the two flows of your financial life side by side, you can have a much clearer picture of your actual situation.

More than that, you can now make adjustments on either side so that in the end you are left with more for yourself.

By increasing your surplus, you can reinforce your investing efforts to make compound interest work for you. That means a more robust financial future, and the possibility to achieve bigger goals.

Speaking of which, setting specific goals can help you keep your motivation and follow through with your plan.

So the question is: what do you want?

Help your friends get ready this year! Share this with them so they can grow along with you.

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