Family savings (copy) (copy) (copy)

Unexpected federal checks, low interest rates, soaring real estate prices and pandemic-related lifestyle changes can all be personal finance opportunities in 2021. File

Unexpected money, low interest rates, soaring real estate prices and major lifestyle changes can all be personal finance opportunities.

This year, many of us are experiencing all those things at once, and 2021 will present an unusual chance to make changes that could help make personal finances more secure.

Planning, and action, will make all the difference.

Unexpected money

Over three rounds of federal relief/stimulus checks most individuals received $3,200, plus $2,500 for each qualifying child. Temporary expansions of the Earned Income Tax Credit, the Child Tax Credit, and the Child and Dependent Care Tax Credit will bring additional money.

In July, most parents who aren't wealthy and have children under age 18 will start receiving monthly Advance Child Tax Credit payments. An estimated 475,000 families in South Carolina will benefit for the first time. 

A qualifying family with two children would get between $6,000 and $7,200 from the tax credit, depending on ages, with half being paid monthly from July through December and the rest when they file a 2021 tax return. That's thousands more than the tax credit was previously worth, and considering that many people in the U.S. don't have enough saved to cover an unexpected car repair, that money could make a big difference.

Unexpected one-time funds are a chance to get caught up on bills, reduce or eliminate credit card debt, create an emergency fund, establish a college savings or save for retirement. Knowing what's coming and planning to make the most of it are crucial.

Those who can afford to save the money can piggyback on existing tax incentives to stretch those dollars, such as by contributing to a tax-deductible retirement or school savings plan.

Low interest rates

With interest rates near record lows, anyone with a mortgage — or even a car loan — should explore whether they could save a few bucks by refinancing.

Locking in a low, fixed interest rate can reduce monthly expenses for many years. Lower rates also build equity faster, because a larger part of each payment goes to paying debt rather than interest.

If you can refinance a mortgage, roll the closing costs into the new loan, and end up with lower payments without extending the term of the loan, that's a big win. Read on to see how you could save even more.

Soaring real estate prices

Double-digit increases in home prices have been bad news for potential buyers, but good news for current home owners and particularly some recent buyers.

With housing prices going through the roof, people who bought a house just a year or so ago with less than a 20 percent down payment may now be able to ditch costly private mortgage insurance payments by refinancing. 

That's because rising home prices create more equity.

If someone bought a $200,000 house with $10,000 down, they had to borrow the remaining 95 percent and the mortgage company would require PMI in case they default, raising the monthly payments. But now, that house might be worth $240,000, so the owner would have more than 20 percent equity and could refinance with no PMI required.

Lifestyle changes

The pandemic changed the way lots of people live and work. That should prompt people to review some of the things they pay for, and particularly insurance.

If you're working from home and driving less, you should be paying less for car insurance. If you're a multi-car family, you may find you have more vehicles than you need.

Meanwhile, you may have taken on new monthly expenses during the pandemic lockdown, such as new monthly streaming services, meal-in-a-box kits, or a new food delivery habit. As things become more normal, consider which of those added costs you could reduce or eliminate.

Our twice-weekly newsletter features all the business stories shaping Charleston and South Carolina. Get ahead with us - it's free.


Reach David Slade at 843-937-5552. Follow him on Twitter @DSladeNews.

David Slade is a senior Post and Courier reporter. His work has been honored nationally by Society of Professional Journalists, American Society of Newspaper Editors, Scripps foundation and others. Reach him at 843-937-5552 or dslade@postandcourier.com

Similar Stories