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5 Financial Resolutions You Can Make Right Now

Apply lessons learned from the past year for a better 2021

A pink piggy bank replaces the zero in a display representing the new year 2021

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En español | Aren't we all ready for a fresh start?

The new year beckons after an awful year of shutdowns, sell-offs, disease, death and dismay. Seemingly solid financial plans crumbled for families and businesses, savings dwindled, and jobs disappeared overnight.

At least we can mine the miserable year for valuable lessons, financial and otherwise. Here's a fresh sheaf of resolutions for 2021 — all doable and all based on what we learned in the COVID wars.

1. Build an emergency fund

It turns out that having just $2,500 socked away can mean the difference between muddling through a crisis or falling off a cliff. That's based on research from the University of Colorado Boulder and Universidad Diego Portales in Chile. To get to that level, direct your bank to move a regular amount to a savings account every month. Do so even if you have credit card debt. And keep some of your money at home, in both large and small bills, suggests Sheryl Garrett, founder of a network of financial planners. Who hasn't needed cash to pay or tip people who are delivering meals or helping out in other ways?

2. Get your affairs in order

Hundreds of thousands of Americans led a normal life one day and then were cut off from their families the next — in hospitals, nursing homes or elsewhere. So many people died without wills, plans or goodbyes. I, sadly, have attended three Zoom funerals and seen close friends dealing with grief and unfinished paperwork at the same time.

Start by filing a HIPAA (Health Insurance Portability and Accountability Act) release form with all of your doctors to specify with whom you would like your information to be shared. This will let family members get updates about your health. (Download free forms.)

I pushed myself through an online guide called “Five Wishes” ($5). By the time I was done, I had a legally binding document that lays out my explicit health care and after-death desires. It's a good exercise.

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3. Make some cuts permanent

In normal times my husband and I spend a shocking amount of our income on restaurants, concerts and shows. Like everyone else, we stopped in March. And we are both surprised by how little we miss it all — and how much we are saving. Others have saved money since they are no longer impulse buying at malls they are no longer visiting.

So reexamine your spending. What have you given up in 2020 that you can keep giving up in 2021?

4. Invest for the roller coaster

Between mid-February and mid-March, large-company stocks fell 34 percent. From there, they rose 55 percent through Oct. 23.

That shows you can't risk having everything in stocks if you want your investments to fund your retirement. Keep enough cash to outlast a downturn in a safe spot — say, a bank account or a money market fund within your IRA or 401(k).

Nor can you risk having none of your money in stocks. If you've been too nervous to invest, loosen up a bit. If you've never worked with a financial adviser, this is a good year to start.

5. Practice gratitude

For me, 2020 hammered home Joni Mitchell's truism: “Don't it always seem to go that you don't know what you've got till it's gone?” I've grown more appreciative of friends, trees and all the little moments I had taken for granted. I see how lucky I am to have food, health and a home in which to live. May you and yours have that as well in 2021. Bring it!

Linda Stern, former Wall Street editor for Reuters, has been covering personal finance since the 1980s.