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Here are Americans’ top goals for the new year. How do yours compare?
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If you’re planning to make a financial resolution to kick off 2023, you’re in good company. Recent research from The Ascent shows that two-thirds of Americans plan on making a financial resolution for the new year. In fact, Americans’ top 10 financial goals include:
Paying off debtSaving for a significant financial milestone, like buying a homeBuilding an emergency savings fundIncreasing incomeSaving for a large purchase, like a vacation or furnitureReducing spendingInvesting moreBuilding better financial habitsSaving for retirementIncreasing charitable contributions
A number of these are particularly important. Without an emergency fund, you might instantly end up in debt if an unexpected expense strikes. And if you’re carrying debt already, it’s important that you do your best to whittle it down so as to minimize the amount of interest you’re paying on it. So it’s a good thing that paying off debt is the most popular resolution Americans are making, with 53% giving it priority in 2023.
In fact, Dr. David Kass, Professor of Finance at University of Maryland’s Robert H. Smith School of Business, says, “Interest rates on credit card balances have soared to as high as 19% during 2022, far exceeding the 7% rate of inflation.” With interest rates that high, even a small amount of debt has the potential to skyrocket.
Kass says that to pay off debt successfully, it’s a good idea to set up a monthly budget. That could help you reduce your spending in different categories to free up cash for debt payoff purposes.
Americans face challenges on the road to meeting their goals
While most people are actively making financial resolutions for 2023, 81% of Americans think ongoing inflation will make it harder to meet their financial goals next year. And Kass thinks that’s something everyone should try their best to get ahead of.
“Since the rate of inflation is currently exceeding the rate of wage increases,” he says, “it may be necessary to reduce or eliminate some expenditures in the lowest priority categories in order to both balance the budget and be able to use surplus cash to either reduce debt or set aside into a savings account.”
Confidence levels are pretty low
Not only are Americans worried about inflation getting in the way of meeting their goals, but just 20% are confident they’ll be able to keep their upcoming financial New Year’s resolutions. Thankfully, Kass has some key advice.
“New Year’s resolutions, whether financial or otherwise, tend to wane as the year progresses,” he says. “One way to overcome this natural tendency would be to set up an incentive system that could, for example, result in a reward for each month that the resolutions are kept. Perhaps a specific dollar amount from each month’s surplus funds can be spent on something special or set aside into a dedicated savings account with the ultimate goal of purchasing a large ticket item such as a home, car, or to cover future educational expenses.”
It’s also a good idea to break up major goals into minor accomplishments. Let’s say you’re trying to dig your way out of $6,000 worth of credit card debt. That may seem daunting. So instead, tell yourself your initial goal is to eliminate your first $1,000 of debt. Once you’ve achieved that objective, move on to your next $1,000.
Fulfilling financial resolutions can be tough even during periods when living costs aren’t so high. But because of inflation, setting money aside for different goals might be even more difficult. But if you take a step-by-step approach to meeting your objectives, you might close out 2023 with a number of key financial wins under your belt.
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