Money management is more important than ever before. The economic uncertainty COVID-19 has ushered in makes understanding money and personal finances paramount as we approach 2021.

In 2019, the average Canadian owed $1.78 for every dollar earned, according to the Canadian Press. The numbers for 2020 will undoubtedly be worse for many Canadians.

In the U.S., 50 percent of workers live paycheck to paycheck with 20 percent not saving any of their annual income. In fact, most U.S. households have less than $1,000 in savings.

Canadians only save 5 percent of their monthly income on average. Here’s a breakdown of monthly budgeting for the average Canadian household, according to Credit Canada:

Monthly debt payments of 10 percent is a particularly discouraging statistic.

But let’s move beyond the economic issues many North Americans face and look toward the future. It is never too late to create new money management habits.

To help, we compiled 6 core money management skills you can employ for a financially well 2021.

New Year — New money management goals. Let’s dive right in!

Money Management 101: 6 Core Money Management Skills For 2021

1. Create Clear Money Management Goals Now

Having clear money management goals in place now can inspire you and your family to save more next year. Downsizing, saving for retirement, or simply putting the family savings account in a better position could all be great money management goals for 2021.

However, if you don’t have clear financial goals set with a very detailed plan of action, successfully reaching those goals next year may prove challenging.

Within your plan of action should be expense tracking. Tracking expenses can be a great way to balance the books, ensuring your money management goals are still a top priority. A few ways to track expenses are:

• Keep a written ledger. Yes, you can always log on and check your spending, but it may be more powerful to put it in writing. Keep a ledger of all money coming in and out for each week.
• Budget worksheets are great for tracking expenses. Writing it down in a notebook may get pretty messy. Instead, you can use a budget worksheet to help keep everything in order.
• Keep your receipts. This is important, because you will need to record all expenses for the week. Without receipts, this could be difficult, and very annoying.
• Enlist the help of a mobile app. Mobile apps can be great for helping you stick to your monthly budget. If you’re ready to get serious about budgeting, You Need A Budget also known as YNAB might be worth exploring. You can even teach your kids how to budget using mobile apps via the Treasure Financial App.

Track expenses often, stick to your money management plan of action, and you may be surprised how easy it is to begin saving more for the future.

2. Don’t Put Money Management Off — Start Saving ASAP

Even though you’re creating a money management plan for 2021, doesn’t mean you can’t start saving ASAP. There are a few weeks left before the New Year, giving you a chance to get a jumpstart on your plan.

Compounding interest is a good reason to get moving on money management and savings as soon as possible. The process of compound interest allows you to earn more interest on your savings.

But to start netting more interest from savings, you need to start saving ASAP. You can use this compound interest calculator from NerdWallet to see just how fast your interest can grow with more savings.

Index funds for instance have a long-term average annual return rate of 10 percent, according to BankRate. Using the NerdWallet compound interest calculator, a $5,000 initial investment with a monthly deposit of $200 over 20 years can earn over $170,000.

Start saving and look at ways to leverage compound interest to increase savings over time. This is a big time money management skill to consider for 2021.

3. Eliminate Spending More Than You Make Monthly

This is an obvious money management skill. However, Canadians owe nearly double ($1.78) for every dollar they make. This creates a recipe for debt, and a recipe for little to no savings year-over-year.

The consumer-driven world we live in makes it pretty easy to spend and spend, far beyond what we make annually. How much should you save every month, instead of spending? Saving 10 percent of your monthly income is a general rule.

If you make $47,000 annually after taxes, your monthly savings should be around $391. This number may seem pretty ridiculous to save each month with mortgage, childcare or school, car payment, and other expenses.

However, it is possible. Cutting some monthly expenses can be your way toward saving 10 percent of your monthly take home pay. For example, eliminating to-go food or restaurants once a week can save up to $200 per month.

Imagine the financial wellness you will have with over $4,500 in your savings account at the end of 2021. That savings could be the emergency fund or beginning of an index fund investment.

4. Set Up Automatic Payments To Your Savings Account

If you don’t see the money, you are less likely to spend it. How do you keep your savings money each month out of sight and out of mind? Set up monthly automatic payments to your savings account.

You can increase your savings faster by automatically redirecting tax returns, pay increases, and bonuses to your savings as well. This only works if you have a budget and savings plan set up, since the money you need to pay bills is already accounted for. The rest can be redirected to savings.

5. Consider Downsizing To Grow Savings Faster

Do you really need two cars, every cable channel, and a big home? It can be hard to resist consumer temptations, especially when it is almost preprogrammed to have more. However, you can stop consumption in its tracks by simply downsizing.

This could be a great money management skill that has serious savings potential. Take a hard look at the large items you have.

For example, having two vehicles can be very expensive. Can you downsize to one family vehicle? The average car payment in canada is $300 per month.

And monthly car insurance is around $110. If you do nothing else but downsize to one family vehicle from two, you could save $410 per month, $4,920 annually. That’s nearly $100,000 savings in 20 years.

Add that to the money you can save each year by reducing mortgage payments and cutting non-essential bills, and you could save in excess of $200,000 in retirement. That is a pretty good chunk of cash.

6. Money management Is All About Financial Behavior

Many people learn about personal finance and generally get the basics. But money management is not about personal finance, it is all about financial behavior. Behavior is what drives purchases, debt, and living beyond one’s means.

If you can change your financial behavior, you can certainly employ money management skills that will set your family up for long-term financial wellness. And don’t get caught up in the numbers game. Financial wellness looks different for every family.

Make a plan, utilize the above money management skills, and set up serious goals that help you and your family live comfortably and happily. What are your money management goals for 2021?