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5 Steps for Financial Planning in the New Year… And Important Dates to Keep in Mind for 2021

5 Steps for Financial Planning in the New Year… And Important Dates to Keep in Mind for 2021

| January 05, 2021

Welcome to 2021! Is that a sigh of relief? With 2020 behind us, we can start tackling the new year by taking the time to set fresh financial goals.

By looking at what you want to accomplish in the next year, you’ll create a pathway to follow and benchmarks to achieve instead of wondering what you should be doing week to week.

Here are 5 steps you need to follow to put your financial goals into action.


Update Your Goals

2020 could definitely be considered an outlier year in that you maybe didn’t achieve as many financial goals as you wanted. But goals aren’t set in stone for a reason; financial plans have to be flexible to change. If you put some financial goals on hold, now is the time to re-evaluate them and see which ones you want to go for this year. 

An interesting psychological fact to remember as you set bigger goals: people tend to underestimate what they can do in a year, but overestimate what they can do in a week. Think you can’t save a certain goal by the end of the year? Think again. You can—or at least come close to it—if you make a plan and work backwards.


Plan to Pay Down Debts

Managing debt is almost a way of life. But having debt can be a good thing, as long as you have a plan and means to pay it off. When you consistently pay down your debt, you raise your credit score, which makes you a good candidate for a mortgage, car, or small business loan. If you have debt that you haven’t touched, now’s the time to face it head on. Look into the debt snowball or debt avalanche effect for paying off your debt and see which one works best for your financial situation.


Rebalance Your Portfolio

There’s no particular reason to rebalance your portfolio at the top of year except that it’s easier to remember; plus, you can see how your asset allocations changed over the course of 12 months. Rebalancing is like a yearly check-up for your investments. Maybe your original asset allocation was 80% stocks and 20% bonds, but by the end of the year, it’s 90% stocks and 10% bonds. You can see that your portfolio is out of balance, and this newer, more aggressive asset allocation is setting you up for risk. Talk to your advisor about your situation to see if you need a tune up. 

Asset allocation does not guarantee a profit or protect against loss.

Pay Down Your Credit Cards 

Credit cards can help build a strong financial foundation if used wisely. If not, the balance on your credit cards can get out of hand with extremely high interest rates, and then negatively impact on your credit score. Credit cards are the most expensive way to borrow money, so staying on top of payments is crucial to avoid getting buried in debt. Try not to make any purchases on a credit card that you’re paying down, and pay off the card with the high interest rate first.


Review Your Credit Report

Speaking of credit, checking in on your credit report should help kick off your year. Your credit report and rating will affect major life decisions and opportunities. Think of it as the resume you present to banks and lending companies to buy a home, purchase a car, or secure a small business loan. You’ll want to know right away if there are any problems with your credit report so you can address them. Just an FYI: checking your credit report is not the same as getting your credit score; you’ll need to order that separately.


Here are some important financial dates to keep in mind for the upcoming year:

  • April 1st: This is the beginning date for your first required minimum distribution (RMD) if you are over 72. For IRAs, it is April 1 of the year following the calendar year in which you reach age 72, if you were born after Jun 30, 1949. If you have a 401(k), profit-sharing, 403(b), or other defined contribution plan, it is generally April 1 following the later of the calendar year in which you:
    • Reach age 72 (age 70½ if born before July 1, 1949), or
    • Retire (if your plan allows this). SOURCE: IRS
  • April 15th: The day taxes are due unless filing an extension.
  • Oct 15th: Tax Day for those who got automatic six-month extensions using Form 4868. File your Form 1040, 1040A, or 1040EZ and pay any taxes, interest, and penalties due by midnight to avoid problems with the IRS. This is also the last date to make 2020 retirement plan contributions for most plan types.
  • Oct 15th - Dec 7: Medicare open enrollment – also known as Medicare’s annual election period – runs from October 15 through December 7 each year.
  • Dec 31st: If you are over 72, make sure you take your RMDs by the end of the year. Most required minimum distributions from retirement accounts (except for the first one) must be taken by December 31 annually to avoid the 50% tax penalty.



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