Many Americans are heading into 2024 under the cloud of financial stress, likely affecting the type of goals they set out for the coming year.
While consumer sentiment has improved recently as inflation and interest rates ease, many people still voice difficulties dealing with expenses and debt.
Nearly half of respondents to a recent Allianz survey, 48%, said they planned to make one or resolutions to manage their money better or save more over the next 12 months. That’s up from 43% at the end of 2022 and 33% in 2021. Four in 10 respondents from the poll say they’re more anxious over their finances than this time last year.
The types of financial resolutions on tap for 2024 haven’t varied much from recent years, according to a Fidelity Investments survey. They’re topped by saving more money (cited by 41% of respondents), paying down debt (38%) and spending less (30%). Building up emergency savings is a topic that has generated more interest lately, according to the Fidelity study.
Given that many people still grapple with these issues, it raises the question of whether New Year’s financial resolutions are effective.
Popular financial commentator Suze Orman isn’t a fan. She doesn’t encourage New Year’s resolutions per se but, rather, urges people to change their mindset by seeking ways to make the saving and investing process more enjoyable.
“Try to get as much pleasure from saving money as you get from spending it,” she said during an interview in November.
Orman said she generally views New Year’s resolutions as being of limited value. “When you make one, you’ll likely break it,” she said. “I don’t know anyone, including myself, who keeps resolutions.”
Steps to improve the odds
Still, behavior changes are possible, and many people do set goals around this time of the year.
One key to keeping resolutions is to acknowledge them, preferably in writing.
“The first steps often include creating a written financial strategy that can serve as a guide to achieve goals like retirement and mitigate risks to those milestones,” said Kelly LaVigne, vice president of consumer insights at Allianz Life, in a statement.
It also can help to create a visual representation of your desired identity and future self, according to John R. Miles, an author and expert on intentional behavior change, leadership and personal mastery. One suggestion: “Compile images, words and symbols that resonate with your aspirations and values,” he said. “Arrange them on a board or create a digital collage as a constant reminder.”
It also pays just to get started, even if it’s a small step. For example, you can begin by making a modest contribution each paycheck into a workplace 401(k) plan or an emergency savings fund, then gradually add to it. Many employer retirement plans include auto-escalation features that increase worker contributions over time, without requiring their consent each time.
Developing good money habits
Solid financial habits that many people say they have practiced over the past year, according to the Allianz survey, include cutting spending, looking for ways to earn more and increasing meal planning to cut dining-out expenses. The poor habits cited by respondents include spending too much on unnecessary purchases, saving too little and not saving at all.
Goals or resolutions should be realistic. A whopping proportion of respondents in the Allianz survey said they plan to retire in the coming year, though it remains unclear how many can afford to do so. Of adults who are currently employed, more than one in five, 22%, said they are likely to retire in 2024, up from 17% who said the same in 2022.
To facilitate retirement, respondents cited downsizing their current spending as a top action, along with placing money into financial products that would protect savings from stock-market declines and developing a plan to address living costs in retirement.
Student debt payments are adding to stress for some people, with 9% of respondents in the survey saying they restarting federal student loan repayments in 2023. Four in five said restarting loan repayments will make it difficult to make ends meet, and two in three said they have or will adjust by reducing retirement contributions.
Focus on planning instead
Justin Smith, a certified financial planner with Savant Wealth Management in Scottsdale, suggests reviewing your financial situation using what he calls an A-B-C-D-E-F approach, and then setting goals accordingly.
“A” stands for automating your financial affairs where you can, such as by directing contributions into workplace retirement plans on a regular basis, and “B” stands for budgeting. “C” stands for consolidating accounts where you can, which he said has become more timely as deposit interest rates have risen; if you consolidate accounts to increase your balance in one or a few, you might qualify for even higher yields, he said.
“D” stands for designating beneficiaries on retirement accounts, insurance policies and the like — and reviewing them at least once a year. “E” stands for putting an estate plan together or reviewing it on a yearly basis, and “F” stands for “federal,” as in taxes. That is, it’s time to start a file for the upcoming income-tax filing season and collect W-2 and other statements when they arrive.
Smith said he believes these tips can help people formulate and stick to a plan, rather than merely making resolutions that they might or might not keep.
Reach the writer at russ.wiles@arizonarepublic.com.
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