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We get it— life happens. It throws hardships at us when we least expect it, often times taking a toll on our finances. In addition to these hardships, life also has a way of throwing surprises at us, and while these surprises are unexpected, many times they are also welcome. However, again, these can take a toll on our finances.

With these unforeseen events occurring when we least expect it, sticking to a budget is easier said than done. Although it’s not always possible 100% of the time, staying on track as often as you can will benefit you in the long run. While 2020 certainly wasn’t the year that any of us were expecting it to be, the upcoming start of 2021 is a great time to sit back and take a deep dive into your current financial situation, set your goals for the new year, and identify what habits you should break before heading into 2021. Here are a few bad money habits to break as we finish out the last month of the year.

       —  Abandoning Your Budget

As stated above, sticking to your budget 100% of the time isn’t always realistic. However, the quickest way to find yourself in debt is by completely abandoning your budget altogether. You will never be able to get ahead on saving money or managing your finances until you begin to live within your means. So, if you’re currently spending more than you’re earning, then revisiting your current budget or even creating a new one for 2021 should be your first priority.

• Neglecting Your Savings Account

When you log into your bank account, does the number you see next to your savings account make you cringe? If so, now is the time to focus on building your savings. While many recommend saving 20% of your monthly income, any amount that you can comfortably afford to put aside while still paying all of your monthly bills is better than not saving at all.

• Making the Minimum Payment

You’ve likely heard time and time again that making the minimum payment on your credit cards and loans is a costly mistake, and it’s true. By continuing to pay the lowest amount required each month, you ultimately stretch out the amount of time it takes to fully pay off your debt and, in doing so, the amount of interest you end up paying significantly increases as well. In fact, by making only the minimum payment, you’ll barely pay off the previous month’s interest.

While there are many different ways to approach tackling debt, one of the most popular and effective methods is the snowball method. List your debts from smallest to largest, regardless of the interest rate. Keep making the minimum payments on all debts except the smallest one— instead, pay as much as you can afford on this one. Continue this process every month until your smallest debt is paid off in full, at which point, repeat the process with each of your debts in ascending order until each of your debts is paid off in full. It takes time, patience and likely more than a few sacrifices, but eliminating your debts is well worth the effort.

• Not Taking Advantage of Your Employer’s 401(k) Plan

Why save for the future when you could be taking advantage of living for the present, right? Wrong. Of course, this doesn’t mean that you shouldn’t enjoy life, but make sure that you’re actively saving for and thinking about life after retirement. By taking advantage of your employer’s match, you’ll build your retirement savings and increase the value of your earnings over time, without paying income tax on those earnings until later.

• Relying On Credit Cards

When used responsibly, credit cards are a useful tool to help manage your finances and build your credit. However, it can become all too easy to begin relying on them to pay your bills and purchase items that you otherwise couldn’t afford outright, with the “I’ll pay for it later” mentality being the driving force that convinces you to continue using your credit card irresponsibly. Of course, in some instances relying on debt is necessary, like taking out a mortgage loan or paying for college, but using debt to cover bills and frivolous, impulse purchases will lead you down a bumpy road that’s difficult to come back from.

Looking at your personal finances and determining what to cut, what to focus on and which habits need to be broken can be daunting, but having a clear plan and achievable goals in mind will set the stage for healthy and successful personal financial management in 2021. To learn more about Valley’s savings account options to help you find financial success in the new year, visit our website or call your local branch today.