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2021 Financial To-Do List

In an effort to do our part to make 2021 better than 2020, the Greenwood Capital Wealth Team has put together a few tips that can help you put your best foot forward in this New Year. We find that preparing for tax season is a good time to consider your financial well-being – after all, you will have pulled together many of the items shared below. 


1. Review Your Emergency Fund

An emergency fund is designed to cover large and unexpected expenses that result from losing a job, a medical emergency, a car breaking down, etc. To build and maintain your emergency fund, it is important that you access it only when your normal paycheck can’t cover an unexpected expense. It is important to keep your emergency fund in a high yield savings account or a money market fund. There are plenty of options – a simple google search will do the trick. The key here is not to be risky with this pot of money.

How much extra cash to keep on hand?
Married & One Spouse Works6 months
Married & Both Spouses Work3 months
Single & Two Sources of Income3 months
Single & One Source of Income6 months
Substantial Wealth (i.e. Trust Fund)3 months
1 month = fixed expenses (rent, mortgage, avg. utility bills, groceries, etc.) – what you need to live on for the month.



2. Eliminate Revolving and/or High Interest Debt

If you are currently carrying a revolving balance on a credit card, you should prioritize paying this down as soon as you have a small emergency fund built.

If you need to buy yourself time, you may consider transferring the balance to a different card that offers 0% interest for a year and pay the balance off as soon as possible, targeting within the 0% year.

According to WalletHub’s Credit Card Landscape Report, the average credit card interest rate was 17.87% in 2020!


3. Consider Refinancing Your Home

Mortgage interest rates are at historic lows. You may be able to switch from a 30-year note to a 15-year note without much difference in payment depending on when you bought your house and how much equity you have now. This results in not only paying your home off early but could also save you decades of interest payments!

You can also consider doing a cash-out refinance to pull some equity out to pay off bad credit card debt or to finance a remodel. On 2/11/2021, Freddie Mac rates were 2.73% for a 30-year loan and 2.19% for a 15-year loan. You can check current rates here.


4. Review Your Retirement & Health Savings Account Contributions for 2020 & 2021

If you were not financially able to contribute to an IRA during 2020, you may still contribute to one until the tax filing deadline on April 15th and receive a deduction for 2020.

• 2020 limit for an IRA is $6,000 for those under 50 and $7,000 for those above 50
• 2020 limit for an HSA is $7,100 for families and $3,550 for individuals


5. Review Your Retirement Plan Allocation

With the rise in the stock market over the past six months, rebalancing your portfolio may be appropriate. When one asset class rises more than other asset classes in your portfolio, an undesired imbalance may exist. Rebalancing your portfolio back to your intended targets will help ensure that your portfolio is not being subjected to unnecessary risk.


6. Review Your Retirement Plan Contribution Limits

Review your contribution limits to any savings vehicle you have (401k, 403b, etc.). There may be an opportunity to increase your contribution rate, which may positively impact your ability to meet your financial goals. You can review all 2021 limits here.


7. Goals

Reflect on 2020, and write down your favorite and least favorite things you spent money on. Find out what brings joy to your life and prioritize your spending habits around that. If you really enjoy a date night, then maybe it’s a good idea to sacrifice in a different area of your life, like making coffee at home, and repurpose those dollars towards date nights in your budget.

Whatever makes you tick, write that down and create a responsible spending strategy towards achieving those things.


Review Checklist

  • Emergency fund
  • Eliminate bad debt
  • Review your mortgage interest rates
  • Retirement contributions for 2020
  • Correct investment allocation
  • Increase your contribution/savings rate
  • Set personal goals and align finances toward them

We believe financial planning is life planning, so take a moment to review these tips as you reflect on 2020 and prepare for your future financial goals. Share with your friends and family.


Greenwood Capital is an SEC registered investment advisory firm. This material has been prepared for information purposes only, and is not intended to provide, and should not be relied on solely for tax, legal or accounting advice.