Only 31% of people are making New Year’s resolutions for financial health at the start of 2015, down from 43% one year ago. Compare that 31% of people committed to financial wellness to the 51% of people resolving to lose weight.
At the start of the New Year, you can’t help but be bombarded with media messages on weight loss and making resolutions for a “better you.” Celebrities endorse diet products sharing personal photos of “before’s” and “after’s,” exercise equipment manufacturers sponsor late-night TV infomercials featuring buff bodies, and gyms rake in the bulk of their annual revenues in the first quarter with wishful enrollments.
While weight loss-wishes rank #1 in New Year’s Resolutions, Fidelity Investments found a declining interest among people to focus on financial health. Fidelity conducted its sixth annual New Year Financial Resolutions Study, asking the question, “can making New Year’s resolutions improve your financial health?” Yes, they say.
“Simple commitments such as saving more and paying off debt can have a tremendous impact on the financial and emotional well-being of a household. The key to achieving your long-term goals and aspirations is creating a plan and sticking to it,” advises Lauren Brouhard, senior vice president of retirement at Fidelity.
When people do make financial resolutions, their top goals are to save more (for 55% of resolvers), to pay off debt (among 20% of people), and to spend less (for 17%).
But the drop in the proportion of people who are committing to better financial health in 2015 is concerning. There’s clearly an uptick in peoples’ confidence in the national economy: Fidelity found that 41% of people feel better about their current financial position compared with one year ago. And 64% of people expect their tax refund will be at least as large in 2015 as it was in 2014.
But one-half of people won’t save that refund, if their behavior repeats that of 2014’s tax season. According to the National Retail Federation’s annual Tax Refund Survey, 46% of people who expected to receive a refund in 2014 planned to save it. What of the other 54? While some planned to pay down existing debt (an important tactic for getting yourself back to financial wellness), others used the refund for everyday expenses or to splurge on a major purchase.
While American consumers are feeling more flush in December 2014 (see my previous column on Gas Prices and Wellness for the Holidays-LINK when published online), Olivia Mitchell of the Wharton School is advising Americans to “prepare to work longer, save more and expect less.” She offers this sobering advice based on several factors: benefit cuts to multiemployer pension plans authorized by Congress in the recently-agreed spending bill; a lackluster housing market; and, a shaky Social Security and Medicare system. Mitchell reminds us: “You only get old once.”
Think about benchmarking your financial profile in the same way you would get on a scale and weigh yourself on January 1st to kick off your wellness goal. By getting real about “where” you are in your personal finances, you can set realistic goals the same way you would plan to shop for healthier food, exercise more, and use technology to regularly track your weight, nutrition, and fitness levels.
Can you see your future financial health? The St. Louis Federal Reserve Bank asks five questions to help us get a solid read on our fiscal futures, which they call The Financial Health Scorecard. Carefully consider and be honest with yourself about the following issues.
- Did you save any money last year?
- Did you miss any payments on any obligations in the past year?
- Did you have a balance on your credit card after the last payment was due?
- Including all of your assets, was more than 10 percent of the value in liquid assets?
- Is your total debt service (principal and interest) less than 40 percent of your income?
The St. Louis Fed developed this scorecard based on real peoples’ responses from over 38,000 families who participated in the Fed’s Survey of Consumer Finances between 1992 and 2013.
The Fed created a video on how to re-build your family balance sheet watch it here:
The Financial Health Scorecard overlooks one money issue that’s getting increasingly difficult for families to manage: health care costs. “Affording medical care is more of a hardship,” Elizabeth Rosenthal wrote in the New York Times one week before Christmas, 2014. Rosenthal cited data from the newspaper’s survey which found that health care costs are considered a “hardship” among nearly one-half of Americans, up 10 percentage points from one year ago. One in three people have skipped getting medical care due to costs, the poll found. One-half of people have received medical bills that were higher than they expected, and one in four people have been contacted by a collection agency about medical bills.
Resolutions for wealth and health were covered this month in USA Today, and one expert’s advice was particularly relevant in the context of your financial health scorecard. Dallas Salisbury who leads the Employee Benefit Research Institute (a think tank that focuses on workplace benefit issues) recommended that we focus on being healthy “today” with attitude, exercise, good food, sleep, and de-stressing. These are all pillars of our Financial Wellness DIY Manifesto, discussed in detail here. (LINK TO FINANCIAL WELLNESS MANIFESTO POST) The “today” aspect is important because most of us aren’t very successful at changing behaviors based on long-term benefits, Dr. Michelle Segar of the University of Michigan’s research has found.
Financial resolutions pay off. The good news is that the one in two people who made a financial resolution in 2014 say they are now better off financially – in just one year, according to Fidelity’s poll. More people stick to their financial resolutions than their weight loss resolutions, making people feel more successful in getting to their personal financial goals versus weight loss aspirations. Make 2015 your year to resolve to get “well-thy.” If you do so, one year from today you will be more fiscally fit, based on Fidelity’s findings.