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2021 Financial Reset

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January 03, 2021

2021 Financial Reset

2020. A trying year on many fronts whether it be personal, professional, or financial, it certainly was not the year many envisioned around this time last year. Now, as we start a new year in 2021 you may have big aspirations for the year and, at a minimum, you are looking for a year that is better than the last. As we learned in 2020, some things are uncontrollable but there are certain things that are within our control and it is up to us to actively focus on these areas. There is no better way to do this than to look at your goals for the new year and a few financial items that you should have on your check list.

Budget

  • The old B word that always gets thrown around this time of year that no one likes. It may not be fun, but it is necessary to ensure you are not spending above your means while also putting away money for those other goals that you have. Try the 50/20/30 model as an easy way to check your current financial spending.
  • 50% is the amount that your fixed bills should not exceed your overall monthly household net income. The best exercise is to list out each one of these expenses along with the amounts in an excel sheet (attached) to determine what you might be able to reduce or eliminate.
  • 20% is the amount dedicated toward your financial goals which can include savings, investing, debt payoff, etc. The key is to have this directly saved into a separate account outside of your current bank and have your employer deposit this percentage right into your account.
  • 30% is the amount for lifestyle or discretionary spending which include eating out, traveling, etc. This can be smaller depending on your fixed expenses but it essentially what is left over you can enjoy on yourself once you've accounted for the fixed expenses and your savings.

Debt Strategy

  • One of the biggest areas Americans struggle is with the amount of debt they undertake although there is a difference between good and bad debt. Bad debt includes credit cards, personal loans, etc. The key regardless is to have a strategy to paying this off even potentially your house as you cannot quantify the psychological aspect of having no mortgage.
  • The best way to do this is to list out each of the debts that you currently have today. Also be sure to list out the outstanding balances and the interest rates as well.
  • Once you have completed this decide whether you want to use the snowball effect which is the target the one with the smallest amount or to pay off the highest interest debt.
  • Tying this into the 20% of the financial goals and allocating a portion of this to paying off the loan you have chosen to pay down first will ensure you follow through on your goal to pay this debt and the other you have as well.
  • Also, having each of your debts laid out in an amortization schedule will allow you to foresee when you can expect to be debt free and keep you focused on this goal and continuing to pay it down each month.

Review Your Beneficiaries

  • This is one that probably hits home more than ever after seeing how the pandemic ravaged our nation and the world. However, you may not know that the beneficiaries you have on your investment accounts (IRA's, 401(K)'s, etc.) and life insurance policies will supersede anything that you might have listed in your will. This is critical if you got a divorce or had a relative as a beneficiary before and never changed it since either one would inherit your accounts or life insurance death benefits when you die.
  • To update this, you will want to check to see who your beneficiaries are on all the accounts and be sure that they are who you want them to be.
  • If you have a Will that will turn into a trust upon your death and have designated how you want things to be disbursed within it then you will want to change the beneficiaries on all the accounts and life insurance policies to be your estate or trust if already set up so that it can be according to your wishes.

Increase Your Savings

  • This is something that always is a goal, but most people do not act on. As I referenced earlier you want to set up a separate bank account at a separate institution and have the money automatically deposited each pay period. From there you can easily increase this either through your payroll website or by telling HR to change the percentage.
  • The best thing to do is to try to increase this as much as possible which will make more sense when you do the budget. At a minimum you want to do at least 1% every year at least personally and into your retirement accounts. This will ensure you are on track to hit your long-term goals while also building a proper cash reserve.

Revisit Your Financial Plan

  • Finally, you want to firmly understand where you are at in relation to your financial goals. Its important to understand this because the numbers from your plan should drive every decision you move forward regarding how much you should be saving as well as the investments and amount of risk you need to take on to achieve your goals. Also, reviewing this can ensure you are planning for different financial decisions before they happen, so you ensure they align with the overall long term plan.


While 2020 may not have been the year that many had hoped for, I think it was certainly the year we all needed to not take things for granted and to be thankful for the many freedoms and liberty's we have. As we get into 2021 be sure to set your goals for the year and place them somewhere that you can see them. Pairing your personal goals with some of these financial goals will ensure you set yourself up for success in 2021 regardless of what life may throw at you.

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About the author

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Kurt Brucker

Vice President, Private CFO®

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

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