It’s a new year! If you are one of the millions (99 million, according to WalletHub, a personal finance website) who make New Year’s resolutions, have you started working on any of them?
It’s early, I know — only a few days into 2020. If you made financial resolutions, you would need more time to execute them — and time to review last year’s resolutions to see what worked, and to assess how likely it is that resolutions will be successful.
Surveys tell us that we are least likely to keep resolutions that are “habitual” (biting nails, being late, etc.) and health-related (losing weight, eating better), compared with financial, educational and relationship resolutions, according to WalletHub.
According to Fidelity Investments’ 2020 New Year Financial Resolutions Study of 3,012 adults (18 years of age and older), financial resolutions are not uncommon. A growing number of Americans (67%) had financial resolutions on their minds for 2020, up from 61% in 2019. They focused on saving, investing, managing debt, budgeting and retirement planning.
According to Fidelity, 50% of those surveyed said they planned to increase their annual retirement savings, and 85% planned to build up emergency funds.
What were the top three financial resolutions? Save more (53%); pay down debt (51%); and spend less (35%).
As to prioritizing resolutions, Fidelity pointed out an interesting observation: “When asked if they had to choose between reaching a financial goal over other popular personal goals, like weight loss, an overwhelming majority (84%) said they would rather save $5,000 than lose five pounds.”
When Fidelity compared last year’s (2019) financial resolutions with this year’s (2020), they found that baby boomers (ages 55-73) seemed to have been taking action more than any other demographic cohort. About 1 out of 3 boomers’ credit proved to be better off this year compared with last year because they “refinanced, paid off, or reduced debt or loans.” In comparison, 19% of millennials (ages 23-38) and 21% of Generation X (39-54) could say the same.
Melissa Ridolfi, vice president of retirement and college products at Fidelity Investments, explained: “Boomers are getting the message that the closer they get to retirement, the more essential it becomes to get their debt under control to make the most out of retirement savings.”
As a proponent of financial literacy, that’s a very good sign.
If you have made financial resolutions, I should also ask if you have a plan to fulfill your 2020 financial goals. Without one, you could run into serious obstacles. WalletHub pointed out the top five that could derail financial resolutions: 1) unexpected emergency (33%); 2) not enough money (24%); 3) laziness (15%); 4) shopping temptation (14%); and 5) “a significant other” (6%).
Would any of those hurdles compromise a financial resolution that you may have made for 2020? For help in sticking to financial resolutions, Fidelity asked its survey respondents for tips.
This is sound advice: 1) set goals that are clear and specific; 2) set realistic goals that are easy to maintain long term; 3) set smaller milestones along the way to stay motivated; 4) keep a record of your progress against your goals; 5) enjoy the feeling of making progress to help stick with the program.
For those of you who don’t do resolutions, how about taking this opportunity to make a plan for the year. What will you do during the year to make sure you are on track to implement the plan (don’t wait until it’s time to do 2021 resolutions)? At a minimum, that plan needs to address how to save and invest for your retirement, my favorite subject. For example, take a look at your 401(k) contributions, especially if you get a refund at tax time. What about automating a bank deposit into an investment account each month?
Are you among those who would like to improve their financial situations in 2020? If so, I’d like to hear from you. Please take a moment to complete a quick (one minute) survey at surveymonkey.com/r/7ZLYS3M.
If you had a jump-start on your financial resolutions by already implementing a retirement plan, such as contributing to your 401(k), make sure to apply to the second annual 401(k) Champion Award honoring participants who “love” their 401(k)s. For those of you who participate in your 401(k) at work and want to be recognized for your knowledge, apply for the award at juliejason.com/award.