PHOENIX — Most of us won't be sad when the ball drops and 2020 is over. It's been a terrible year for a lot of us financially.
One thing we've learned is that saving money when you can isn't just a good idea. It's absolutely crucial for many Arizona families.
So how can you do that in 2021?
Increase 401k contributions at work. With traditional 401ks, contributions are tax-deferred and gains are not taxed.
$19,500 is the limit this year and in 2021, more if you're over 50.
Consider refinancing a mortgage. Rates are very low. Recently, I found just a 2.91 rate for a 30-year fixed refinance and 2.42 for the average 15-year. Experts say 40% of people with mortgages can save an average of $309 a month. Check your rate, fees, and see if it makes sense for you.
Want better loan and credit card rates? Pay off debt.
Your debt-to-income ratio is what you pay towards debts divided by your monthly income. 36% or less is the goal. Think about that as you holiday shop.
The pandemic taught us we need to put some money aside when we can. That takes a budget. You may have to adjust it, but the 50-30-20 rule is popular now. That means take 50% of your income for living expenses, rent, groceries, necessities, 30% for recreation/entertainment, and 20% for savings and debt.
Finally, how much is taken out of your paycheck to cover income taxes? If you're getting a refund, it's too much. Instead, consider lowering your withholding so you have more money for your other goals.