(Newswire.net — October 15, 2020) — With the end of the year closing in on us, it’s time to look back at the resolutions we made at the beginning of the year to see the progress we made on them. For many, new financial goals, such as growing your savings account or paying off debt, are common New Year’s resolutions. However, as the year goes on, it can be easy to fall back on your goals. This is especially true for 2020 due to the COVID-19 pandemic shutting down the economy and leaving people out of work.
However, even during times of economic uncertainty, it’s possible to make smart financial moves. Take a look at the top three financial moves we recommend to make before the end of the year.
1. Pay off student loan debt
Millennials are in a much different position than previous generations when it comes to student loan debt. Only a few decades ago, the price of full-time tuition was a fraction of what it is today. This is why millions of recent college graduates are drowning in student loan debt, still living at home, or sharing a small apartment with five other people to afford rent.
One of the smartest moves you can make is paying off your student loan debt as fast as possible. This is because, over time, interest accrues, which can add up rather quickly over time. Due to the COVID-19 pandemic, Congress passed the CARES Act, which set interest rates to 0% until December 31st, 2020. This is great for student loan borrowers because it means interest isn’t accruing during the current recession. The CARES Act also suspended student loan payments altogether, until December 31st, 2020.
Even though you don’t have to pay right now, working on lowering your student loan bill while the interest rate is set at zero means you can off more of your principal balance. When January 1st, 2021 comes around, you can have a much lower principal balance, which means the amount of money you pay in interest will be lower, too.
2. Plan next year’s savings
Even though we still have a few months left of the year, it’s never too early to begin planning for next year. As we learned in 2020, anything can be thrown your way. For millions of Americans, they found out the hard way that they weren’t prepared for a significant economic collapse from a worldwide pandemic.
Planning ahead of time can give you enough leeway on building a robust emergency savings fund that can be used in the event of a lay-off or furlough. Some actions you might want to take include following the 50/30/20 budgeting rule, where:
- 50 percent of your income goes toward necessary expenses like housing, insurance, and groceries
- 30 percent of your income goes toward wants like shopping and dining out
- 20 percent of your income goes toward savings
In addition to budgeting, it’s important to think about your taxes, too. You’ll want to consider what tax allowance you want to be taken out for the year. If possible, you might want to consider claiming zero allowances, so your employer withholds the maximum amount. In return, you’ll most likely receive a large tax return that can be put toward your savings.
3. Maximize your retirement savings
Most retirees will tell you one thing—start saving for retirement as early as you can. Why? Because doing so will give you a comfortable nest egg so you can enjoy your golden years to the fullest extent. With that said, take advantage of your employer’s 401(k) plan. If you don’t have access to a 401(k) plan, open up an individual retirement account (IRA) and save money there.
A key piece of investment advice is to never put all your eggs in one basket. This means you should have a diversified portfolio. Along with your retirement accounts, consider opening a high-yield savings account or investing in stocks. Profits made from these mediums can also be put toward your retirement.
Wrapping up
2020 has been a year like no other. Even though we’re in the middle of a global pandemic that has caused businesses to lay off their workforce or close their doors altogether, it doesn’t mean you can’t work on your finances before the end of the year. With these three financial moves, you’ll be ready to start 2021 on the right foot.