Try-It-Out Tuesday: Making Financial Resolutions
Today’s the day to enjoy your chocolate cake, your one (or three) glasses of Merlot and any other vices you need to get out of your system. Tonight marks the start of the New Year. And, tomorrow is the day you embrace those New Year’s Resolutions.
For many of you, that means a money makeover. In Fidelity Investments’ fifth annual New Year Financial Resolutions Study, over half (54%) of Americans are looking to spruce up their money habits in 2014.
Topping the list of financial resolutions: saving more, paying off debt and spending less.
What’s changed since years past? In 2014 more people (up 10%) plan to prioritize their savings for short-term goals, like emergency funds, opposed to long-term goals, like retirement. That’s not necessarily a bad thing. According to Ken Hevert, vice president of retirement products at Fidelity, this shift in focus suggests Americans are becoming more balanced with their savings plans. And even with the drop, saving for retirement still remains the top savings goal.
For those of you who have committed to saving more in 2014, especially for retirement, here are a few tried and true (yes, you’ve heard them before but they work!) ways to accomplish your money resolutions in 2014:
Get on board an employer-sponsored plan: “If you have access to an employer-sponsored plan – a 401(k) or 403(b) – and you’ve got the opportunity to get an employer match, you want to absolutely participate in that program at a minimum, up to the point you get that maximum,” Hevert said. Self-employed? No problem. IRAs, or solo 401(k)s, are cost-effective and easy-to-use ways for saving as much as possible for retirement.
Go on autopilot: “Individuals who are on an automatic savings plan are much more likely to stick with their savings as either: A) They’re faced with personal financial challenges, or B) The market becomes volatile,” Hevert said. “We’ve seen, year after year, people who are on an auto contribution plan – either to a 401(k) or IRA – those are the ones who continue to stick to it.” The same suggestion can apply for your regular savings accounts, too.
Assess your assets: One suggestion that doesn’t require you to write a check or set-up an automatic contribution plan is simply reviewing your assets. “A lot of people kind of underestimate the importance of this step, which is to really take a look at how your overall long-term retirement savings are allocated,” he said. “By simply revisiting your asset allocation and making sure you’ve got the right mix of equities, bonds and cash, it can make a meaningful difference over time.”
Save together: In the current survey, 44% of respondents said they generally make their financial resolutions alone, whereas 29% said they make them with their spouses or significant others. If you have a partner, the latter might be the better approach. In earlier research, Fidelity found that the biggest piece of advice long-time couples had for other couples was to make all financial plans together. When you share financial responsibilities (and goals) you keep each other on track. That makes achieving your goals all the more likely. “We’ve seen when people plan as a household and plan as couples the likelihood of achieving their objectives is much more favorable,” Hevert said. Living the single life? Sharing goals with your family and friends works, too.
Happy New Year!
