After a year of financial precariousness for so many, those with the funds could make money decisions in 2021 to get back on track. According to a new survey on behalf of NerdWallet and Marcus from Goldman Sachs Almost 4 in 5 Americans (78%) said the pandemic caused them to take financial action.
Here’s how you can use these cash movements to accelerate your 2021 goals.
1. Pay closer attention to finances
Two in five Americans (40%) say they paid more attention to their finances because of the pandemic – a good habit for everyone, regardless of income. One eye-opening way to get started is by tracking every dollar you spend for one to three months. Once you have a number, you can determine if you want to spend that much. You might spend exactly what you want on exactly what you want, but for many of us budgeting can be key to aligning our spending habits with our priorities.
Not sure where to start? The 50/30/20 budget is a smart and easy way to allocate your income to your expenses: 50% of your take-away pay for needs, 30% for needs, and the last 20% for savings and debt payments. This approach may not work for everyone – for example, those in high cost of living areas may struggle to use only half of their income on needs – but it is a good goal to work towards it.
2. Do more of your online banking
The pandemic resulted in 33% of Americans trying or increasing their use of digital banking services for the first time, and causing 32% of Americans to do more banking online. Not only does online banking save time and energy, it also enables customers to reduce the risk of exposure to COVID-19 by avoiding physical bank branches.
Just online banks aren’t the only ones offering online services. Many brick and mortar banks have apps and websites that customers can use to do most, if not all, of their banking business from their computer or phone.
Concerned About Safety? Avoid unsecured Wi-Fi networks when logging into your bank accounts, use two-factor authentication and make sure the online bank is monitoring for fraudulent activity.
If you choose a tech-savvy bank this year, look for a bank with low or no fees and high interest rates. With interest rates currently near historical lows, you may not find anything that will change the game. However, past trends suggest that they will rise again as the economy recovers. In particular, the interest rates offered by online banks tend to be higher than the current national average savings rate. (The Federal Deposit Insurance Corp. defines the “national interest rate” as a simple average of the interest rates paid by US custodians as calculated by the FDIC.)
3. Prioritize savings when you can
Over a third of Americans (34%) say they saved more money as a priority than they did before the pandemic, and 31% of Americans said the pandemic has caused them to save or save more for emergencies since it broke out . Indeed, according to a recent one Consumer sentiment survey By Marcus of Goldman Sachs, compared to their current behavior, more than a third (34%) of Americans believe they will save more in the next six months.
Regardless of whether you have a specific goal, e.g. For example, a down payment on a house or a more stable emergency fund, or whether you just want to give yourself options in the future, it is good practice to save money consistently. Not only will this help you meet a goal, but it also means you are spending less than you deserve, so you will be better able to weather an unexpected blow to your finances.
The 50/30/20 budget is a great way to figure out how much money you can use towards your goal, taking into account your repayment plans. For short to medium term savings goals, a savings account can be the ideal place to keep your money. Investing money for short term goals carries a much higher risk. While growth is slower in a savings account, your money is where you need it.
If your goal is to save an emergency fund as a bulwark against financial turmoil, budgeting for three to six months’ worth of spending is a good strategy. Start small: save $ 500 or $ 1,000 first, then go from there. It can take several years for your account to spend up to half a year, and that’s fine. Save consistently and consider allocating windfalls – such as tax refunds or discounts – so that your emergency fund target is met even sooner.
The Consumer Sentiment Survey was conducted by Marcus of Goldman Sachs in December 2020 among 1,502 Americans.