2020 was a tough year for many of us. As the year comes to a close, its time to get mentally ready for 2021.
According to mywalletjoy.com, 62% of Americans are projected to fall short of their financial goals for 2020.
I think the takeaway is: let's not repeat the same result in 2021. We need to do better.
If you are part of that 62% (I know I am), find out what went wrong by dissecting your financial situation and decision making.
Spend some time reviewing hits and misses from 2020. Hits are financials goals you met or exceeded, and misses are areas where you need improvement.
Then move on with a targeted financial plan using the following 5 smart financial goals for 2021.
Pay off Credit Card Debt
If you have credit card debt, paying it off should be your #1financial goal. Period. It will siphon money out of your pocket until its gone.
Do yourself a favor and add up how much you spent on credit card interest over the last 12 months. Looking ahead to 2021, do you want to spend that much of your hard-earned money on interest payments to credit card companies?
Squash debt for good with this free debt payoff tracker worksheet.
Set an Annual Savings Goal
How much money can you save in 2021? If you don't have any credit card debt, you can start saving immediately. If you have credit card debt, pay it off fast, and then start working on your savings goal.
If you have $2k in credit card debt and you can afford $500 in payments toward your debt each month, you can pay it off and start saving by Month 5.
Based on the above example, you would plan to save at least $500 per month for the remainder of the year.
Increase your savings by spending less, getting a raise or promotion at work, and starting a side hustle.
Start a Side Hustle
There are two ways to build your net worth: increase your income or decrease your spending. I'm a fan of doing both. A great way to increase your income is to start a side hustle.
A side hustle is a side job that earns you extra cash. It can be a part-time job or a small business you launch. The possibilities are endless, from online jobs to in-person gigs.
Here's a handful of ideas:
- Sell stuff on Ebay from your home or estate sales.
- Buy old furniture and refinish it to sell on Facebook marketplace or at a local shop.
- Wedding photographer or videographer.
- Start a blog or social channel to generate ad and affiliate income.
- Join the gig economy and drive for Uber Eats or shop for Instacart.
- Create a product to sell on Amazon.
- Start an online drop-shipping store.
Learn to Invest
Once you start saving money, you need to put it to work for you. One of the main ways to do that is by investing it. One of your financial goals for 2021 should be developing your knowledge of investing.
If you don't know how to buy or sell stocks, why not learn how? Anyone can do it. All you need is some capital (cash) and a brokerage account. If you do know how, focus on new techniques like dividend stocks, technical analysis, or options trading.
Here are some top notch investing books to get you started:
Beginner Investing Books
If you've never traded stocks, mutual funds, or ETFs outside of your company's 401k platform, this book will get you started with the basics. It explains the process of buying and selling stocks in common sense language.
There's an entire universe of investors who swear by the method of John Bogle. The “Bogleheads” use what is known as the “Boglehead Formula” to invest their hard-earned dollars. This method is very easy to set up and maintain.
It doesn't require you to follow stock prices or understand what's happening in the market from day to day. And while its not glamorous, it generates a nice return on investment for thousands of investors.
Intermediate Investing Books
If you have a basic understanding of how to buy and sell stocks, mutual funds, and ETFs, expand your knowledge with the following books:
This is the book that took my trading skills to the next level. If you are interested in swing trading (short-term trading), I highly recommend you read this book. The author, John Murphy, is a former technical analyst for CNBC and director of Merrill Lynch's Technical Analysis Futures Division.
Its simply the most comprehensive book on technical analysis you will find anywhere.
The Little Book of Big Dividends: A Safe Formula for Guaranteed Returns by Charles B. Carlson
Dividends are one of the leading sources of passive income. This book will teach you how to construct a portfolio that generates dividends through the BSD (Big, Safe Dividends) formula.
Advanced Investing – Learn to Trade Options
If you want to learn advanced investing techniques, I could recommend a few books. But as someone who has traded options for the past several years, my best advice is to learn by doing.
Yes, you will lose money. But the best way to learn options is by putting real skin in the game.
Selling (or writing) vertical option spreads is one of the most lucrative ways to make money on the stock market because you have three ways to win every trade:
- If the underlying stock goes in the direction you wanted, you win.
- If the underlying stock price stays the same, you win.
- If the underlying stock price goes against you, but doesn't cross your strike price, you win.
Before you can make money selling vertical option spreads, you need to learn a few things: option fundamentals, liquidity, and implied volatility. Then do this:
- Watch Tastytrade for free. They will teach you how to trade options and they are entertaining and fun. They have archived series where they teach newbie traders how to trade options in real time.
- Open a brokerage account at Tastyworks and fund it with some cash. Start trading by copying the trades made on Tastytrade. The visual Tastyworks platform makes it easy to set up your trade and manage your risk level.
Options trading changed my life. I'm not a morning person, but every weekday I wake up, rub my sleepy eyes, reach down to the floor where my phone is charging, and check the stock market. It never gets old!
I'm not a day trader, but I do trade options several times each week. I sell vertical spreads and buy them back when they are worth less than I sold them for. I check my positions every day, and close them as they become profitable.
Its one of my favorite activities.
Pursue a Passion
If you have a hobby, dream, or passion that you haven't pursued, this is the year you need to start.
Ideally, your side hustle is your passion. But if not, this is the year you should treat yourself by diving in to your passion, whatever it may be. A hobby, a sport, a lifestyle choice, a new career.
Find Your Passion
If you don't know what your passion is, spend some quality time figuring it out. Try a brainstorming session, or maybe just try new things and see what excites you.
Your passion is a subject or activity that brings you joy. To help find it, answer the following questions:
- What subject or activity brings you joy?
- What are you skilled at that you also enjoy?
- What are the most important things to you?
- What are things other people compliment you on?
- Are there multiple answers to the above questions? If so, that could be your passion.
Achieve Your Dream
Planning for and achieving your dream is one of the most fulfilling experiences you will ever have. So why not go for it? Once you decide to do that, your life will change forever.
You'll have boundless energy fueled by passion. You'll realize all of your previous fears were unfounded. You'll learn and grow by leaps and bounds.
Once you decide on success, you will be unstoppable, tireless, and motivated like Elon Musk.
Best of all – you'll stop worrying. Instead, you will embrace your future will arms wide open.
If you are an expert at a certain skill or subject that you love, consider monetizing it by creating a Youtube channel, starting a social channel on Instagram, Twitter, or Tictoc, writing a book, starting a blog, or creating an online course to teach others.
Yep, you can turn any of the above into income streams, AND enjoy the time you spend creating the content for your followers and readers.
Best of all, learning how to monetize your content will be a great learning experience that will keep you engaged.
Sharing your enthusiasm on a subject is not only fulfilling, its equally rewarding for the person learning from you.
Free Printable Worksheet
Download a free printable worksheet to record your financial goals for 2021:
If you like free worksheets, sign up to receive a new one into your inbox every week! Sign up here: Free Worksheet Every Week signup page.
The Bottom Line
Get a strong start with smart financial goals in 2021. Pay off your credit card debt, increase your income with a side hustle, create a savings target for the year, open a brokerage account and learn about investing your savings, and finally, get past the boring stuff and on to the richness of life: treat yourself by pursuing a passion or dream, and then monetize it by sharing what you know with the world.