In a recent survey of Americans, Fidelity Investments found that while Americans are optimistic about their finances in 2020, they also plan to reduce personal debt and save more.
Nearly eight out of 10 predict they will be better off in 2020, said Melissa Ridolfi, vice president of retirement and college products at Fidelity Investments. The survey also showed a growing percentage who plan to make a financial resolution this year, 67%, up from 61% last year. The survey also found that nearly half who made a resolution in 2019 were able to keep that resolution.
A survey showed 67% of Americans plan a financial resolution to spend less and save more.
“It’s important for people who set resolutions to make sure the resolution is clear, and not make it so big they fall under the weight of it. The goal for a financial resolution is to build a habit for the long term,” she said. “We found from survey that living a debt-free life was a big motivator for setting a resolution,” she added. “Fidelity talks about paying down your highest interest debt first, or paying off debt with lower balances.”
One of the hints for keeping resolutions is to go after small wins, like paying off small balances, and then celebrating those.
“People using credit cards to spend daily should avoid annual fees and look for cash back rewards that you can put into savings.”
Interestingly, when asked if they had to choose between reaching a financial goal over other popular personal goals, like weight loss, an overwhelming majority (84%) say they would rather save $5,000 than lose five pounds. Perhaps that is related to the top-listed financial mistake — 36% said they had dined out too much. Looks like a twofer lurking there — save money and lose weight by not eating out so often.
One of the top motivators for making a financial resolution: living a debt-free life. The top three resolution are Save More, 53%; Pay Down Debt, 51%; and Spend Less, 35%. Their motivations include getting control of daily expenses, 56%, having a comfortable retirement, 54% and self-care or mental well-being, 50%. Across all generations, most people feel they are in a similar or better financial situation compared to last year. Among those who said they are doing better financially, 47% said they were saving more money, while only 25% said they were working more hours.
Those who achieved their financial resolutions for 2019 share their best tips: Set clear and specific goals, 51%; have realistic, easy-to-maintain goals, 48%; set small milestones to stay motivated, keep a record of your progress, 39%; and enjoy the good feeling from making progress, 37%. For all generations, taking care of their health (53%) and spending more time with loved ones (50%) are top priorities. Gen Z shows the greatest interest in meditation at 29% while Boomers appear to be channeling Marie Kondo and plan to declutter their homes, 45%.
What could possibly go wrong? Unexpected expenses, said Ridolfi. Fidelity suggests people set aside an emergency fund of three to six months’ expenses Then, if you are saving for goals beyond an emergency fund, like for retirement, break down how much you want to save and if you have access to 401k or a similar retirement account through work.
Fidelity recommends a savings goal of 15% of income.
“But that could be overwhelming. The big thing is to take that small step. If you get a company match make sure you are saving up to the company match and each year try to increase by 1% until you get to 15%.”
For more Fidelity advice on resolutions, go to the company’s web site. Charitable donations through Fidelity Charitable have been strong even as individual charitable donations dropped slightly, 1.1% in 2018, perhaps due to tax uncertainty and market fluctuations, the company said. The donor advised fund distributed more than $5.25 billion in grants to over 125,000 charities recommended by Fidelity Charitable donors through mid-October, breaking the full year record of $5.2 billion granted in 2018.
