There can be no gainsaying the fact that the past year has been unprecedented in its challenges as a result of the sudden and mysterious appearance of the novel coronavirus and the global health crisis it spawned. With recent news that vaccines are now in play, the world collectively holds its breath in anticipation of a beginning of the end of this nightmare. That said, no one knows definitively what the new year will bring, which means that, more than ever, you must take care of your personal finances in order to combat any future volatility in the market.

As 2020 comes to a close, there is no better time to reflect on the successes and failures of your money stories this past year, and reset financial goals.

Track your spending for 2021

Unless you’re Amazon honcho Jeff Bezos, whose net worth rose, according to Forbes magazine, by some $4.9 billion amidst the pandemic, making him the world’s first person to amass a US$200-billion fortune, it’s probably safe to say your personal finances, in particular your liquid capital experienced a bit of a wobble. Especially during the first months of COVID, when you were grocery shopping and hoarding toilet tissue practically every other day. What is the state of your savings? Are they almost depleted because you’ve engaged in an avalanche of spending that has gotten completely out of control? Or, perhaps your finances took a hit not from COVID, but from critical illness in your family, eroding most of your financial cushion. Make an honest assessment of what you’ve been spending your money on and where your financial plan derailed so that you can forge ahead with a new one to get back on track in 2021.

Go back to basics

Start fresh by creating a new budget. Begin by listing all your fixed expenses; that is, regular monthly bills such as loan repayments, utilities, rent, mortgage, car payments. Then list those expenses that are variables, the ones that change from month to month, like groceries and entertainment. Then determine, based on what your short-term and long-term financial goals are, how much you need to put away as saving to achieve these. (Remember, short-term goals, such as reducing credit card debt, take roughly a year to achieve. Long-term goals, like retirement or your children’s education, will take a longer time.) View savings as compulsory and must be adhered to, even if it means cutting back on your variable expenses.

Pay off ‘bad’ debt

There are two types of debt: Good and bad. Good debt allows for earning a return on investments. Then there is bad debt, which is associated with things that quickly lose their value and don’t generate long-term income for you. Commit to paying off this kind of debt as much as possible.

A huge obstacle to wealth creation is debt. Credit cards, as the joke goes, are a very present help in time of trouble. But, bear in mind they are also in effect bank loans that, like any other loan, accrue interest. In today’s world, however, they are a necessity, and can work for you only if you practise tight fiscal self-discipline. But let’s say you haven’t last year. To make any kind of substantial dent in your credit card debt, it is vital that you pay more than the mere minimum balance each month. Credit card debt, however, is merely one kind of debt; there’s also student loan debt, mortgage debt, or any other kind of debt obligation you can find yourself shouldering. Find innovative ways to enhance your debt reduction strategies.

Supplement your income stream

Even with your commitment to making a budget and paying off debt, it may still be difficult to do so in a reasonable period of time. Don’t be overwhelmed; you are not alone in this predicament. Let’s say you overdid it with retail therapy over the holidays and are now drowning in debt going into the new year. Assume that a salary increase isn’t exactly in the offing just now. But this is no time for hand-wringing or sinking even deeper into the morass of additional debt. Commit to pursuing ways of turning a hobby, for example, into a way of earning more. Or, perhaps you’ve been toying with moving on to a more fulfilling, possibly more lucrative, career. Is now the time to go for it? Don’t be paralysed by fear.

Economic hardships are sometimes unavoidable, as 2020 has shown so many, derailing the best-laid financial plans. Assume that volatility will continue because of the extreme toll the pandemic has taken. But be steadfast in your commitment to paying off debt, saving, lowering spending, and improving your income stream. You are still here, which means with every day there’s an opportunity to improve. As you look toward 2021 with cautious optimism, use the hard-won lessons of the past year to design strategies that will put you squarely back on the path to a healthy financial future.

Season’s greetings, and all the best for the new year from the NCB family to yours.