(This column was released for publication on Dec. 23, 2020.)
Let’s all resolve to make 2021 a better year than the miserable 12 months we have just gone through.
Boom! Achievable resolution – one everyone can agree on – in the bag.
After a year with so much misery, we can stop the resolutions right there, focusing entirely on having better days ahead and on getting back to our regularly scheduled lives — or what will feel like normal once we emerge from the coronavirus pandemic — confident that the New Year will bring improvement.
But in simplifying our lives to one modest resolution, we should also test ourselves using a longer time horizon, one which sets goals that get us through the end of the pandemic, the return to some semblance of pre-Covid living, and into whatever a re-shaped normal is going to be.
Entering the year with potential uncertainty around your health, welfare or employment status and/or with discomfort about the stock market, the economy or the future of the country and the world, a promise to drop weight, hit the gym, save more, bake better sourdough bread or to travel the world visiting family really isn’t inspiring or life-changing right now.
Instead, set goals and targets for the next three years. That way, you look past the pandemic to where things stand once we reach new normal. It makes your resolves easier to stick with, because the uncertainty of the next few months – and the side effects that can linger much longer – will diminish, allowing for real progress to be made by the end of 2023.
Three Year’s resolutions – instead of New Year’s resolutions – should focus on what you want to recapture, rebuild, protect and improve. With your finances, they’re about the next steps in getting from where you are now to where you want to be when “what’s next” becomes “what’s normal now.”
Here are a five financial Three-Year resolutions that can help you get to where 2020 is nothing more than an unpleasant memory.
Rebuild/replenish/enlarge your emergency fund.
A survey released early this month by MagnifyMoney.com showed that 54 percent of consumers have an emergency fund, and that 43 percent of those savers had tapped their panic money during the pandemic. Furthermore, more than half of the people with an emergency fund had actually taken on debt rather than touch their cash reserves.
Conventional financial-planning wisdom suggests that you save between three and six months of expenses in an emergency fund; that protects against unplanned expenses like a big home or car repair, medical bills and more – as well as a temporary loss of income.
There is never a bad time to be building emergency savings, only bad times to suffer an emergency. One lesson to take from 2020 is how much money you need set aside in cash in order to feel “comfortable” during tough times. Whatever that amount is in your life, make it your goal to have that set aside in three years or less.
Reduce financial stress.
This is too vague to be your actual goal, but your experience – and the stresses you’ve got now – will direct you to the specifics.
Even before 2020, it was virtually impossible to live in the modern economy without some measure of financial stress; that’s still going to be the case when the pandemic has ended.
Identify what is stressing you out; if you need to save more, pay the bills and reduce debts, rebuild emergency monies, improve your credit score, insure your health or your valuables, spend less or some combination of that and more, set targets that will have you feeling particularly secure once you hit them over the next three years.
Update your health-care directives, wills and estate planning.
Sadly, 2020 proved just how unprepared many people are to meet their ultimate end. Dying without a will – or getting seriously ill without a health-care proxy or advanced medical directive in place – makes a hard situation worse for your loved ones.
Planning for your demise – which can include considering and pre-paying for final arrangements – is not pleasant, but it can be cathartic and contribute to peace of mind. It need not be complicated and costly.
No one wants to struggle for life while plagued emotionally by the mess they’re about to leave their loved ones. Fix the issue before it becomes your problem; you can get this done well inside of three years, so set a time limit that, hopefully, doesn’t involve a real deadline.
Improve your employment security.
There’s no shame in losing a job during a time when unemployment hits levels last seen during the Great Depression, and the pandemic could be a 100-years black swan kind of event that won’t be repeated.
But the resulting changes in the economy and the ways people work have shown that everyone needs a Plan B, and maybe a way to make themselves an indispensable part of Plan A.
Whether you need additional training or if you think playing office politics could improve your chance of avoiding some future cut, do what is necessary to keep your job. At the same time, think about what jobs you’d want if yours went away and take positive, concrete steps that ensure you are a candidate to get those opportunities if need be.
Take care of yourself first.
The better your health, state of mind and finances, the healthier you will be for yourself and your family. The pandemic shutdown has made it easy to neglect ourselves, as it can be tougher to use the gym, or you might not like waling/exercising with masks, or your retirement savings could be put off to fund day-to-day expenses at home.
Giving yourself three years here makes sense because there are still many roadblocks facing us all as Covid-19 plays out. Don’t be discouraged if you can’t quickly lose those [Covid-]19 extra pounds you’ve added since last March.
Making yourself a focus of your efforts may sound selfish, but you’ll find that being good to yourself makes you better for those around you.
Chuck Jaffe is a nationally syndicated financial columnist and the host of “Money Life with Chuck Jaffe.” You can reach him at email@example.com and tune in at moneylifeshow.com.
Copyright, 2020, J Features