Many Americans are planning ahead for uncertain times by adopting financial resolutions for the new year.
According to a 2023 financial resolutions study by Fidelity, more than half of Americans are considering a financial resolution. About half are ready to make practical resolutions and focus on balancing short-term and long-term financial goals.1
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A generational breakdown of who is considering a financial resolution in the new year.
By reflecting on the challenges of 2022, here are financial resolutions we recommend you consider for 2023.
Build an emergency fund
Although you aren’t capable of forseeing future disasters, fortunately you can prepare for them. An emergency fund can help hold you afloat when you face a financial jam. This fund should be used for emergency situations, like your trusty vehicle breaking down, or getting laid off at work. At a minimum, you should aim to build yourself an emergency fund with enough money to cover at least three months of essential bills. However, don’t stop there! The larger your emergency fund is, the thicker your safety net becomes.
Grow your savings account
You may want to boost your savings account balances this year to support your financial goals. Before putting more money into your savings account though, take the time to determine your short-term and long-term financial goals.
Short-term goals have more specific deadlines typically ranging from six months to five years. These goals include vacations, large retail purchases, and recurring payments. Long-term goals could include plans for real estate and retirement. The timeline for these goals is usually much longer, but it’s still important to plan for these goals so they aren’t neglected or forgotten.
Pay credit cards off in full
If you’re carrying credit card debt, then you’re trapped wasting money on interest fees. Holding onto high-interest debt can be toxic to wealth-building. Sticking to a strict budget can help you achieve this goal and repair your credit score. Checking your balances weekly and adjusting your spending will also help you gain control of your credit card debt.
Create or update your will or estate plan
Having and maintaining a will is important for protecting your assets in case something happens to you. This is especially important if you have dependents. If you want to make sure your assets are distributed the way you want, go the extra mile and create a full-fledged estate plan. Your financial planner can guide you through the best process to achieve this goal.
Stick to a financial budget
A financial budget could make it easier for you to manage your bills, spending, and savings. Forming, and sticking to, a monthly household budget can help you keep your bills and savings on track. It’s a regular routine that reinforces your goals and encourages you to resist the temptation to splurge.
A popular method of creating a budget is to follow the 50/20/30 budget rule. You can implement this rule with every paycheck you receive. The 50% accounts for your “needs” which include bills, groceries, transportation, insurance, healthcare, etc. The 30% refers to your “wants” in life, such as eating out, entertainment, shopping, vacations, and anything that is not absolutely essential. The remaining 20% is for your savings and investments.
Connect with your financial advisor to discuss which financial goals work best for your financial journey and the possible outcomes of 2023.
Source
- Fidelity.com, December 8, 2022. https://newsroom.fidelity.com/press-releases/news-details/2022/Fidelity-Study-Americans-Say-2023-Is-the-Year-of-Living-Sensibly-as-People-Plan-Ahead-for-Uncertain-Times/default.aspx.
