Every January 1st, millions of people adopt a New Year’s Resolution—an attempt to set and follow through on a goal to better themselves in some way in the coming year. These resolutions, often a chance for a fresh start, commonly involve health or diet changes, financial well-being and becoming a better person.
37% of Americans made some sort of resolution related to financial matters for the start of 2016, according to Fidelity Investments’ annual New Year Financial Resolutions Study. The study found the top 6 financial resolutions of 2016, as well as that for those who made some sort of fiscal resolution at the start of 2015, more than half feel they are now better off financially.1
While most start out with the intention of diligently sticking with their chosen goal throughout the year, New Year’s Resolutions are notorious for their high drop-off rates just several weeks into the new year. So, how do you persevere to achieve your goal? If you are one of the many making a financial resolution for 2017, here are this past year’s most common resolutions and how to stick with them:
Save more money was the top financial New Year’s Resolution for 2016, with 54% of those who made a financial resolution setting this as their goal.1 While increasing your savings seems simple enough, it can be difficult to stay the course of the goal as the trials and tribulations of daily life take place.
What you can do: Automate your savings. If you don’t already take advantage of this, start by allocating a certain amount of money to be automatically transferred into your savings account, either via direct deposit or transfers you set up from your checking account. By placing this on autopilot, you effectively remove the possibility of forgetting to contribute a percentage of your earnings towards savings. Moreover, if you never see the money in your checking account, you may not even miss it.
Spend less was the second most common resolution of 2016. If you find yourself constantly wondering where your money has gone at the end of each month, this may be a goal worth pursuing. However, similar to the resolution above, a goal of spending less money is likely to lose steam without an actionable plan attached to it.
What you can do: Be specific. Compose a detailed plan at the beginning of the year designating which areas you can cut back on. By reviewing your spending habits over the past year, you may be able to discover multiple ways to reduce your spending in the coming year. For example, if you are spending more than you realized on going out to eat weekly, try cutting back and eating out just once a week. The more specific you get, the likelier you are to stick to your plan in the long term.
Coming in third for 2016 was a resolution to pay off debt and sixth overall was a goal to pay off credit card debt. According to a study by ValuePenguin, 38.1% of all American households carry some sort of credit card debt, with millennials and those over 74 making up the age groups holding the least amount of credit card debt.2 However, college graduates are exiting school with an increasing amount of student loan debt—the class of 2015 owes an average of $30,100, up 4% from just 2014.3 Given these statistics, if you find yourself carrying more debt into 2017 than you would like to, you’ll need to do more than just commit to paying it down.
What you can do: Develop a strategy and be held accountable. If you have multiple forms of debt, a good starting point is to categorize your debt by interest rate and subsequently prioritize the debts with the highest rates before working your way down. If you have only been paying the minimum amount on your credit card or student loans, review your budget to see if you have any extra room to increase your payments. If not, use the tips above to get creative and find where you can cut your spending to allocate more towards paying down your debt. Your financial advisor can also help you determine how to, if necessary, increase your payments. Lastly, be held accountable. Tell someone about your goal and have them check in on you to see how you’re doing. While it may seem insignificant, having someone inquire about your progress might be just the push you need to keep going.
Developing a long-term goal strategy ranked as the 4th most common resolution for 2016. A long-term goal strategy could include saving up for a house, college planning for a child, retirement planning or saving up for a dream vacation. Preparing for any long-term goal requires dedication and determination.
What you can do: Set small milestones. Start off by identifying what you would like to achieve and the timeframe in which you would like to do so. Then, because working towards a long-term goal can take years before you see results, set small milestones along the way. If you are working towards saving for purchasing a house, establish how much you would like to set aside by the end of the year and break it down from there—think in terms of more manageable weekly or monthly amounts instead of the big number at the end of the year. For additional help in establishing and carrying out a long-term goal strategy, contact your financial advisor.
Make/stick to a budget was the 5th most common resolution. While developing a budget can be relatively straightforward, the process of sticking to it over the long term can be strenuous. Most with a goal of creating and sticking with a budget have a successful few weeks or months before the burden of living by predetermined standards becomes too much to keep up with.
What you can do: Be realistic and try not to get discouraged. When you create your budget, remember that you are more likely to stick with it if staying on budget does not seem like such a chore. As much as you may want to cut your coffee runs entirely out of your budget, chances are that you’ll stop by a Starbucks at least once in the next year. Additionally, dealing with unexpected expenses is the most common reason for not sticking with a resolution.1 If for whatever reason you find yourself not being able to stay on track with your budget, accept the setback and figure out how to continue on. Even if you will not be able to meet your goal for the end of the year, you can at least better position yourself for the coming year. In fact, 83% of individuals said their goal in 2016 was an ongoing resolution, rather than a one-time event.1
If you need additional support in carrying out your resolution, get in touch with your financial advisor or find one here. Good luck in your endeavors and Happy New Year!
Written by North Star Resource Group.
1Fidelity Investments. (2015). Fact Sheet: The Fidelity Investments® 2016 New Year Financial Resolutions Study. Retrieved from: https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/executive-summary-new-year-resolutions.pdf.
2Harrow, Robert. (2016) “Average Credit Card Debt in America: 2016 Facts and Figures.” ValuePenguin. Retrieved from: https://www.valuepenguin.com/average-credit-card-debt.
3The Institute for College Access & Success. (2016). Student Debt and the Class of 2015. Retrieved from: http://ticas.org/sites/default/files/pub_files/classof2015.pdf.
Financial Advisors do not provide specific tax or legal advice. This information should not be considered as specific tax or legal advice. You should consult your tax or legal advisor regarding your own specific tax or legal situation.
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