The turbulent year we all experienced in 2020 revealed several things. It’s important to look back and see what we did well and what we can improve upon as we enter 2021 regarding our finances.
Sharon Ko: I know you’ve heard it before, or maybe even said it yourself, “I’m so ready for this year to be over.” Well, before it ends, how about a year in review of your finances? Hindsight is 2020, after all.
Karl Eggerss: Did I not save enough? Did I overspend? Did I get too emotional with my investment portfolio and really make some really stupid decisions with that?
Sharon Ko: So you did a look back. Why not do a look ahead?
Karl Eggerss: 2021 could be a very unique year. A lot of people, if the pandemic’s behind us, are going to want to travel. They’re going to want to go see friends. They’re going to want to go out to restaurants. They’re going to want to go hang out with their friends at a bar, whatever they like to do. There’s an opportunity there, or a potential hazard of spending too much.
Sharon Ko: If you want to set goals, be specific. And most importantly, be real with yourself.
Karl Eggerss: What is realistic for you and your family? Don’t worry about what your neighbor’s doing. Don’t worry about what your friends are doing. They may be buying cars, or houses, or new technology. You need to look at your financial reality. How much money is coming in the door, and what’s appropriate for you to save and spend.
Sharon Ko: This last one here is to give yourself a pat on the back.
Karl Eggerss: I’m a big fan of actually setting up kind of a discretionary account. So maybe it’s your fun money, some people call it. And if you have extra savings after some of your bills are paid, after your emergency fund is all set up, you don’t feel guilty for spending it. If it has extra money at the end of the year, great. So I would physically set up a separate bank account, which is really to reward yourself for having your financial plan and really sticking to it.