The COVID-19 pandemic showed us all just how financially vulnerable we can be. The pandemic has caused ripple effects throughout the financial world from Fortune 500 companies to small business on Main Street to household savings for millions of people.
For many people throughout Arkansas and Oklahoma, this is the time of year where they will be working with their accountant or other tax service professional for tax preparation. This time of year can also be an opportunity to speak with your CPA or financial advisor for tips to improve your financial position in 2021.
Below are a handful of financial “resolutions” you can implement in 2021 to help you along the way. It’s recommended to always consult your CPA to determine which steps are right for your tax situation.
Save For the Immediate Future
It’s a principle that’s as old as money itself.
Saving money will be important in 2021. Make sure to set a realistic budget that you and your family can work within to maximize the amount of money you can put back into savings.
There are tools available to help you get started. You can find budget calculators available online on sites such as SmartAsset or NerdWallet that can help you get your budget moving in the right direction.
Save for Retirement
Time flies. Be prepared for when you reach retirement age.
There are retirement savings accounts available that offer different tax benefits. The median retirement savings for Americans between the ages of 55 and 64 is estimated to be $104,000. How does your retirement savings stack up?
Ask your CPA or other financial professional which retirement savings option will be best for you.
Create An “Emergency Fund”
Few things can derail your financial planning faster than an unforeseen expense or other financial emergency. Even a minor financial hiccup can knock your financial plan off track.
Establishing an emergency fund to help offset these unpleasant surprises (and they will pop up from time to time) can keep you pointed in the right direction.
Pay Down Debt
Paying down debt can be good for both your financial health (fewer payments going out) and your physical health (less stress and better sleep).
There are different ways to structure a debt repayment plan (the cash flow index, for example). Consult your financial professional to determine the most effective debt repayment plan for your needs.
Evaluate Insurance Coverage
If other people depend on you, it’s important to make sure they will be financially secure in the event you’re no longer able to support them. Insurance options including life, disability in addition to sufficient health insurance coverage can protect your family.
Where do you want to be financially one year from now? Having a plan in place to get you there is the first step to improving your financial position in 2021.
There are many factors to consider when creating a financial plan, not the least of which is taxes. A skilled, experienced CPA can be an important part of developing a comprehensive financial plan for 2021.
Written By Lance Montgomery