Drawing up a list of financial resolutions for the new year isn’t the routine exercise it once was. The COVID-19 pandemic has changed that, as it has altered so many other behaviors.
It’s not just a matter of plotting the usual ways to save more money, cut debt or re-evaluate your spending patterns – this year’s three most popular money resolutions, according to Fidelity Investments’ 2021 New Year Financial Resolutions survey. Rather, the COVID-19 pandemic and the financial pressures it has caused have brought a new sense of urgency to some goals, while posing different challenges and presenting new opportunities.
Evaluate spending, budget
Budgeting, for example, ranks as a top financial resolution year in and year out. But this time, things are a bit different because the pandemic changed spending patterns for many people. If you review how you spent money over the past year or two, you likely can spot key differences and perhaps areas for improvement.
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For example, you’re probably not driving as much anymore so you might not need a car to the same extent. Maybe you don’t need to buy as many clothes, especially for work, or perhaps you’re spending much less on entertainment and restaurants. Most likely, you cut back big time on travel. Maybe you can reduce these expenditures permanently.
“Make an inventory of what you did in 2020, and use it as a roadmap for 2021,” suggested Bobbi Rebell, a certified financial planner and adviser for Splitit, a site that helps people make interest-free purchases on installment. “Our definition of needs and wants has changed so much.”
Assess your insurance needs
You might have noticed that you don’t require the same types or levels of protection as before. Auto insurance is an obvious example, now that more people are working or studying at home. That has meant fewer cars are on the road, with a sharp reduction in vehicle accidents and better insurance deals.
“The staggering drop in accidents this year resulted in a dramatic drop in claims paid by insurers,” said the Consumer Federation of America and the Center for Economic Justice in a recent review of accident statistics.
The groups want to see insurers lower premiums – and many have. It thus might be a good time to evaluate your insurance needs with an eye on shopping around.
Conversely, you might need more home-insurance coverage, or different types, if your dwelling has risen in value, you recently completed remodeling projects or you set up a new home-based business.
Cancel unneeded subscriptions
While you’re looking at spending, take the time to evaluate your various subscriptions, memberships and other accounts with an eye on eliminating those you no longer use, said Rebell. Look to cancel automated, recurring payments whether tied to your bank account, cellphone or other accounts if you rarely use those services anymore.
Cancellations don’t need to be permanent and might bring about a better deal. If you change your mind, you can always resubscribe to a service and might receive a coupon, introductory rate or discount for doing so, Rebell added. Also, look to reduce paper clutter by signing up for email statements where possible.
These and other moves to get more organized weren’t necessitated by the pandemic, but you might now finally have the time to get it all done.
Plan for an unreliable tax refund
Many Americans still haven’t built up an emergency fund, and the COVID-19 outbreak with widespread job losses didn’t help. But there could be a special need to accumulate a cash cushion now because you probably can’t count on your annual income-tax refund arriving with as much predictability as in the past.
Tax refunds are the largest chunk of change many Americans receive all year and a key source of funds to pay down credit card balances and so on. But office-shutting measures to control the virus slowed tax-return processing and the issuance of some refunds by the Internal Revenue Service.
“Taxpayers shouldn’t rely on receiving a refund by a certain date, especially when making major purchases or paying bills,” the IRS warned in December. “Some tax returns may require additional review, and processing may take longer.”
The IRS said it already expects that refunds tied to the earned income tax credit and the additional child tax credit won’t be issued before mid-February.
Maintain online vigilance
The IRS and other entities have warned of an uptick in cyber scams tied to stimulus payments, coronavirus-relief measures and the like. Given that many of these federal and state programs are new, it’s easy to get confused. Plus, more people are shopping online amid the COVID-19 outbreak, raising the odds of falling victim.
Hence the need to stay alert. Among key points: Be skeptical about offers from unfamiliar companies, avoid clicking on attachments and be wary of unsolicited messages from tax authorities such as the IRS, which doesn’t initiate contact this way.
Also, take the opportunity to change passwords to lessen the odds of having an account hacked. Americans don’t change their passwords often. Nor do they utilize complex, lengthy passwords. Password manager NordPass said it determined this by examining 275 million passwords, with the help of a data-breach security firm. Of those, only 44% were unique.
The 2020 list of most common passwords was similar to those from 2019. For example, the numerical string “123456” was near the top both years. Other common ones include “password,” “picture1,” “111111,” “qwerty” and “abc123.”
Review all your online accounts and delete those you no longer use, NordPass suggests. Favor passwords that are unique, complicated and long.
Invest in yourself
Even before COVID-19 arrived, many Americans found that their job and financial-literacy skills were lacking. Now might be a good time to take courses or make other personal improvements, especially as so much of this can be done online.
While people usually think of financial resolutions in terms of saving more or cutting debt, learning and earning more also are important, noted Dana Anspach, a certified financial planner with Sensible Money in Scottsdale, Arizona. “Learning is the foundation of both making smarter investment decisions and increasing your earning power,” she said.
As with any resolution, Anspach said it’s critical to devise a plan to make it happen by defining actionable steps and putting them on a calendar, now. Other helpful tips include having a mentor or accountability buddy and following a course of action for at least three to four weeks, until the new behavior becomes routine.
Reach Wiles at [email protected]
This article originally appeared on Arizona Republic: Consider 2021 financial goals and budget in light of COVID-19 pandemic