2020 gave us unprecedented times where the entire world was forced to reevaluate how they were living. One aspect that naturally required a different perspective was how we manage our finances.

With jobs on the line and the global economic damage caused by the COVID-19 pandemic, many people realized the need to switch their financial habits for a more secure future. So, here are five money habits that you need to start implementing in 2021:

Build an emergency fund

Emergency savings are critical in case of unforeseen circumstances. A report analyzing Covid-19’s financial impact highlighted how approximately three-in-five Americans believe their emergency savings won’t last through the end of the year.

This figure makes it even more essential to build your emergency fund. It’s a good idea to start with a $1,000 fund, which won’t necessarily cover massive emergencies but can help reduce your dependence on your credit card. You should plan in advance and have a few months of expenses in this fund.

Spend carefully

It’s critical to be conscious of your spending habits. If you’re always confused about where your money is going, you need to start thinking before spending. An excellent idea is to start writing down your essential spending, such as rent and utilities. This makes you realize your responsibilities and be careful about spending on other, non-important things.

Create a budget and stick to it

Creating a budget forms the foundation of financial success. Knowing the ins and outs of your finance helps you evaluate your financial situation. If you’re struggling in this area, you can always explore budgeting tools that can simplify the process for you.

The key is to keep revising your budget, ideally monthly, to help identify any areas of improvement. The budget needs to be visual; otherwise, you’ll find it challenging to focus on it.

Set financial goals

One of the most critical steps to financial success is to set meaningful goals. Without these goals, you’ll find it incredibly challenging to track your progress. These goals need to be S.M.A.R.T, i.e., specific, measurable, achievable, relevant, and time-bound.

Your financial goals can be small or big - it doesn’t matter as long as you commit to implementing them and holding yourself accountable.

Plan your debt repayment

You need to work towards eliminating your debt continually. While it may not be realistic to pay it off entirely in the current year, you should still have a plan you’re actively working towards. Explore different debt repayment strategies and figure which one works for you. Spend less on unnecessary expenses and aim for financial freedom.

Final Thoughts

You can implement numerous financial habits in 2021, and the five listed above are an excellent place to start with. Any financial practice you take up will bring you closer to your financial goals, and every step counts.