Despite concerns about inflation and rising costs, many Americans are optimistic they will be in a better financial position in 2022, and are making new saving and spending resolutions.
According to Fidelity Investments’ 13th annual New Year’s Financial Resolutions Study, more than 6 in 10 (62%) Americans feel optimistic about the future and 72% are confident they will be in a better financial position in 2022. In addition, a greater number of people report that they were able to stick to their resolutions in 2021, with 71% of respondents saying so, up from 58% in 2020. Consequently, nearly 7 in 10 (68%) respondents are making financial resolutions for the new year.
Savings Objectives
Among those considering a financial resolution, the steps cited most often are:
- saving more money (43%);
- paying down debt (41%); and
- spending less money (31%).
For those looking to save more in 2022, the objectives are somewhat split—51% plan to save for the long term, while 49% are looking at shorter-term objectives, such as boosting emergency savings or saving for a mortgage. Among the next generation, however, 62% plan to increase their retirement contribution in the year ahead, at a far higher level than older Americans (34%).
Ironically, some of the financial success of sticking to their resolutions may be attributed to the pandemic. In fact, respondents discovered several surprising silver linings these past two years, with “becoming more thoughtful about saving and spending” topping the list (42%), followed by “becoming closer to family” (39%) and “becoming stronger as a person” (34%).
Among the top reasons people gave for making financial resolutions were to achieve greater peace of mind and live a debt-free life. But beyond hopes, the findings suggest the simple act of making a resolution may actually have a transformative effect, including having them become lifelong habits.
Based on suggestions from those successful in keeping resolutions this year, the key to success is the feeling of making progress and setting clear financial goals. Furthermore, 86% of all respondents felt having a plan in place can help them better deal with the unexpected.
“This study confirms that actions taken at the start of the pandemic—such as budgeting better and replenishing that emergency savings fund—are becoming permanent habits for many,” notes Stacey Watson, senior vice president of Life Event Planning at Fidelity Investments. “Americans are connecting their new perspective on well-being to the way they approach their finances, and as a result, becoming more thoughtful about saving and spending.”
Storm Clouds?
Still, most people have not forgotten what the country has been through and are viewing their financial expectations practically, with concerns about inflation and rising costs weighing heavily on the minds of many, according to Fidelity.
For those who report being in worse financial shape in 2021, the No. 1 reason given was inflation. In fact, 40% of respondents cited inflation as the cause, compared with only 27% in 2020. This is also the top concern for 2022, followed by unexpected expenses and the pandemic’s impact on the economy.
Notably, if a financial setback does occur, rather than raiding their retirement account or taking out loans, Americans indicate their top solutions would be to cut back on other expenses (54%), followed by dipping into their emergency savings (39%). Fidelity notes that this is consistent with what it saw in its retirement accounts last year, with a steady decline in savers taking out 401(k) and 403(b) loans.
Compared with last year, however, the study suggests that stress levels have decreased significantly. When stress is present, it involves finding money to save after paying monthly bills, the ability to simply pay bills and saving for retirement. Part of this stress reduction may be attributed to acceptance, as 84% of Americans say that after living through the pandemic, they’ve learned to let go of worrying about things they can’t control.
