More Americans are making a financially focused New Yearâ€™s Resolution this year, according to a new survey. That's good news, according to experts, because goal-setting can pay big financial dividends.
More Americans are making a financially focused New Year’s Resolution this year, according to a new survey.
Fidelity Investments’ latest New Year Financial Resolutions Study found 37% of Americans are considering making a financial resolution for 2016. That’s up from 31% in 2015. The findings were based on phone interviews with 2,013 adults ages 18 and older.
Lauren Brouhard, senior vice president of retirement solutions at Fidelity, said it’s a good sign that more people are thinking about financial goals, in part because the process of making a goal requires a financial self-evaluation.
“The act of making the resolution kind of forces you to think about the how — How am I going to do it?” she said. “And that’s going to actually make you more likely to achieve it."
Those with relatively high incomes, such as physicians, had a similar heightened interest this year when asked about financial resolutions. Last year, one-quarter (25%) of people with $100,000 or more in investable assets said they planned a finance-focused resolution for the coming year. This year, that number increased to 31%. Brouhard said the survey also found that people in that income category who did make resolutions were somewhat more likely to keep their resolutions.
“Perhaps their ability to keep their resolutions is a little bit stronger because they’re in a stronger financial position overall,” she said. “In terms of considering a resolution, they may not feel this is as pressing of a need. Although of course, we’d say we all have room for improvement.”
Overall, 54% of respondents who are planning a resolution said their goal is to save more next year, making it the most common goal among respondents. The next most common goal was spending less (19%) and paying off debt (16%). In fact, 11% said they were specifically focused on paying off credit card debt, which is an all-time high for the annual survey.
Brouhard said that’s good, because credit card debt is usually the costliest debt.
“Certainly people should understand all the different types of debt they have, but certainly high-interest credit card balances would be the first debt we suggest people pay down,” she said. “You’re just spending a lot more money on your purchases over the course of time.”
Among savings-focused respondents, 63% said their goal was to save for long-term needs, such as college, retirement, and healthcare. Meanwhile, 32% had short-term savings goals in mind, with 60% of those respondents saying they need to build up an emergency fund. Fidelity noted that the slightly higher number of people looking to build an emergency fund this coming year may reflect economic instability.
However, the overall feeling among respondents was mostly positive — 72% said they expect to be better off financially in 2016. Fidelity set up a website designed to help the public set and meet financial goals. It's available at fidelity.com/resolutions.
The survey also asked respondents about their fears for the coming year. Unexpected expenses, the economy, and healthcare costs in retirement came in first, second, and third place, respectively. The latter could come as a surprise to many nearing retirement. A recent Fidelity study found the average couple who retires this year at age 65 can expect to have healthcare expenses of $245,000. That’s based on a life expectancy of 85 for men and 87 for women, and assumes the retirees don’t have employer-provided health coverage but instead use Medicare.
Brouhard said physicians are more acutely aware of the healthcare needs of older Americans, but she said they still might be surprised by just how fast the costs can add up. For people with high-deductible insurance plans, health savings accounts (HSAs) can be a good way to protect against unexpected health costs later in life.
“It’s a convenient and attractive account in that the money grows tax-free and is actually tax-free upon withdrawal is used for qualified expenses,” she said. “In retirement, those savings can be used for other retirement expenses as well.”
Brouhard said one key step to meeting the challenge of retirement costs is simply to be aware of them. Once one is aware, there are several ways to plan and prepare.
In fact, one way survey respondents said they planned to prepare for healthcare costs was by working to avoid them in the first place.
“One thing that was interesting is that 87% of respondents said they plan to improve their physical health as a way to lessen their long term healthcare costs,” Brouhard said. “People are understanding how interconnected your physical and your financial health are.”
See an infographic of Fidelity's top-line findings below: