The top 5 financial goals for 2021 — and how to get started
Here’s what you need to know to help improve your finances in the new year
After the upheaval of 2020, it’s no wonder that many Americans are refocusing on their financial priorities. In a recent survey1 conducted by the Harris Poll on behalf of Empower Retirement and Personal Capital, we asked about top goals for the new year. The result: Americans are increasingly prioritizing investing and securing their financial futures.
Here are the five key financial goals Americans told us they want to focus on in 2021 — with a few ideas about how to get started.
- Build an emergency fund
Financial professionals recommend keeping three to six months’ worth of living expenses in an emergency fund. Aim to accumulate enough to cover items like housing costs, insurance and loan payments plus money for groceries, your cell phone plan, car maintenance and other essentials should you lose your job or be out of work due to an extended illness or other emergency. Consider keeping your emergency fund in a separate bank account, where you won’t be tempted to spend it.
- Save for retirement
Many Americans will live a long time after retirement — possibly decades. Maintaining your lifestyle all those years can require a significant nest egg. Say you currently earn $50,000 a year and want to maintain 100% of that income in retirement. Factoring in your Social Security payments and accounting for inflation, that might take $1 million or more in savings. Impossible? Not if you save $5,500 a year for 40 years, which could amount to $1.2 million depending on market performance.2 And tax-advantaged investment accounts like 401(k)s and IRAs can make it easier to hit that mark. With traditional 401(k) accounts and IRAs, you pay no taxes until you start withdrawing funds in retirement, and by then your investments may potentially have grown. (You make contributions to Roth accounts with after-tax dollars, so qualified withdrawals are tax-free in retirement.) Be sure to take advantage of your employer’s retirement plan: Many companies will match all or part of your contributions, helping you grow your nest egg even more quickly.
- Pay off personal debt
Credit cards often carry high interest rates (18% or more), and issuers are happy to let you pay for that new TV over decades — with interest piling up along the way. Prioritize paying off credit card debt after saving for an emergency fund and maxing out your company retirement plan. Meanwhile, try to break the credit card habit. Once you’re out of the hole, treat cards like cash — if you can’t pay the bill within a month, don’t make the charge.
- Invest in the stock market
Your company’s retirement plan provides a great way to access the stock market. Many retirement plans make the process of investing easy. For instance, you might be able to invest in a target date fund, which adjusts its investment mix over time and becomes gradually more conservative as you approach retirement. Your retirement plan may offer digital tools and professional advice to help you get started; consider tapping them for additional support.
- Get your financial house in order
An orderly financial house begins with careful recordkeeping so you know where your spending goes and how much progress you’re making toward your spending goals. Consider using an app like the one provided by Personal Capital, which puts all your financial information in one place and helps you analyze your spending and saving.
Improving your finances is a bit like planting a garden; the rewards take time. But time is on your side if you stick with it — all the more reason to get started right now.
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1 Back to (Financial) Basics How Americans are responding after an unprecedented 2020.
2 Coryanne Hicks, US News & World Report, “9 Charts Showing Why You Should Invest Today,” July 2018. money.usnews.com/investing/investing-101/articles/2018-07-23/9-charts-showing-why-you-should-invest-today
Investing involves risk, including possible loss of principal.
Asset allocation and balanced investment options and models are subject to the risks of their underlying investments.
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