Consumers to save money as financial matters attain greater priority 2021: Survey

*To each financial goal, a budget is an essential tool. It’s like a roadmap and keeps you from getting lost, enabling you know where you are at all times

Emmanuel Akosile | ConsumerConnect

Against the backdrop of the Coronavirus (COVID-19) pandemic that disrupted upset just about everything in 2020, including personal finance, it’s not surprising then, as people look ahead to 2021, that many are resolving to improve their money management.

An end-of-the-year survey by personal finance site MoneyRates.com found “I need to be better with money” ranks right up there with quitting smoking and losing weight.

In the survey, a majority of those making financial resolutions list three main priorities ─save more, spend less, and pay down debt.

On the need to establish a budget, the survey found that just over 60 percent of respondents intend to save more in the coming year.

Those 55 and older, who are fast approaching the traditional retirement age, are the most motivated.

More than 38 percent said creating a budget with a specific savings amount would be their main approach to saving, followed by setting up automatic deposits into savings accounts.

Richard Barrington, MoneyRates’ senior financial analyst said: “It’s concerning that 28 percent of those who say they plan to save more don’t identify any specific steps for how they plan to do so.

“On the positive side, over a third of people who intend to save more plan to start by creating a budget.

“Having a budget is the single most important step to boost savings. It creates a specific savings goal but also ensures that more money is coming in than going out.”

A big part of being able to save money is to reduce expenses, especially credit card debt. For instance, US the National Foundation for Credit Counselling (NFCC) is a non-profit organisation that helps consumers set up a plan for reducing credit card debt.

In the group’s advice to consumers resolving to reduce debt in 2021, the NFCC suggests setting goals that are specific, measurable, attainable, relevant, and time-bound. According to the organisation, goals need to be realistic but challenging to keep you motivated.

To reach those goals, a budget is an essential tool. It’s like a roadmap and keeps you from getting lost. With a budget, you know where you are at all times.

In the study, more than half of consumers want to reduce debt, nearly 55 percent of those in the MoneyRates survey said they hope to reduce their debts in the year ahead.

Focusing on high-interest debt like credit cards is a smart move since the interest rates of those balances averages around 17 percent.

In certain cases, a balance transfer credit card that offers 12 or more months of 0 percent interest can help reduce debt faster since 100 percent of the monthly payment goes to pay off the principal.

Barrington stated: “Prioritising debt so you pay down the highest interest debt fastest is the most cost-effective way to reduce debt.

“It helps if you can reduce the interest rate on some of your debt balances.

“However you prioritise your payments, though, always make sure to meet the minimum monthly requirement for each debt.”