Keeping Score

How to improve your finances in 2021

Give your finances a fresh start in the new year


If your finances or credit took a hit in 2020, these tips can help you get back on track in the new year.

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If 2020 was hard on your wallet and your score took a tumble, you are not alone. Unfortunately, as winter sets in, unemployment numbers have begun to climb back up. This could get even worse if new pandemic lockdowns go into effect. Congress recently passed a new stimulus bill that includes renewed unemployment benefits and a $600 stimulus check. However, this might not be enough for many people.

Having a great credit score begins long before you start spending. Improving your score is really all about your financial habits. Here’s how you can protect your credit score and your overall financial health in 2021.

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Check your credit reports

Before you can improve your score, you need to know where you stand. Start by getting copies of all three of your credit reports now from Typically, you can only access one free credit report a year. But thanks to the CARES Act, you can access free credit reports from the three major credit bureaus (Equifax, Experian and TransUnion) weekly.

Compare each report to see if any items show up on one and not the others. If you do find discrepancies or even downright mistakes, take the necessary steps to correct them. Each bureau has a process for making corrections, which will be shown on your report. Be sure to follow through on making these corrections, because most of the time it is up to you to do so. These are your reports after all, and they should be as accurate as possible.

See related: What is a credit report?

Figure out your current financial situation

Next, figure out how much money you are bringing home every month and how much money you are spending. Your bank and credit card statements are a good place to start but will likely not tell the whole tale.  If you need to get more in-depth, track your spending for a month. Write down every penny you receive and do the same with your expenses (noting how you paid for whatever it was – cash, check, debit or credit).

This exercise can be quite the eye-opening experience. You may think you haven’t been spending that much on takeout food since it’s been harder to go out to restaurants, but when you see it written down in black and white your perspective may change.

Armed with this information, find a budgeting plan that works for you. There are numerous free and low-cost resources for budgeting, from a simple spreadsheet to an interactive plan that tracks your moves for you and keeps you on the right course. There is something out there for everyone. You just need to figure out which one fits your lifestyle best.

[text_call0ut]You may think you haven’t been spending that much on takeout food since it’s been harder to go out to restaurants, but when you see it written down in black and white your perspective may change.[/text_callout]

Make a plan and follow it

Once you’ve seen where your credit stands and have an idea of how much you’re spending each month, it’s time to make a plan and put it into action. If your credit score did indeed fall in 2020, make a goal to boost it in 2021 by paying all of your bills on time and keeping your utilization low. If this is your goal, think twice before opening new credit, since hard credit checks will slightly lower your score.

See related: How to improve your credit score

If your income has taken a hit this year, think about what you can do in 2021 to come up with the funds to begin whittling away any debt you have. You may be able to bring in more money through a second or part-time job (either in-person or online). Sell unwanted items through a garage sale or online. Take a second look at your monthly budget and see where you can make some adjustments.

Finally, make a plan to save in 2021. In the new year (or when you get back on the payroll), put any money left in the budget straight into savings. Keep yourself on track by setting automatic transfers to savings. You should do this, even if you only have $5 leftover. When you get a raise, overtime, bonus or other increase, put half of the money in the savings you just set up and keep half for yourself. You won’t miss the extra money, since it’s money you don’t have right now.

Here’s to a better 2021 for all of us. Remember to keep track of your score!

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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