More than six in 10 (62%) Americans feel optimistic about their financial future and 72% are confident they’ll be in a better financial position in 2022.
This according to Fidelity Investments’ 2022 New Year’s Financial Resolutions Study, released Dec. 9, which also found that 68% of Americans are considering making a financial resolution as New Year’s Eve approaches.
Despite the optimism, 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.
Perhaps fueling the optimism is the survey’s finding that 71% of respondents were able to stick with their 2021 financial resolutions, up from 58% in 2020.
“The country has been through a seemingly unrelenting roller coaster over the past two years, so it’s encouraging to see people feeling more hopeful about the coming year and placing a priority on themselves,” said Stacey Watson, senior vice president of Life Event Planning, Fidelity Investments. “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. 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.”
More practical view of financial resolutions
Some of this financial success, ironically, 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%).
This aligns with what Fidelity has observed among its clients, as the company has seen 1.6 million households engaged in planning interactions with Fidelity in the second quarter of 2021 alone, a 24% increase over the same period a year earlier.
This thoughtful approach to finances is carrying through in the new year, with a more practical view toward financial resolutions: 38% overall are considering more conservative goals, a number that is even higher (46%) among the next generation (which for this study is defined as respondents ages 18-35).
401k-focused advisors may be interested to learn that 62% of those next-generation respondents say they plan to increase their retirement plan contribution in the year ahead, which is a substantially higher percentage than respondents older than 35 (just 34% say they plan to increase contributions).
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.
The percentage of workers with an outstanding 401k loan has dropped in seven of the last eight quarters.
Fidelity Q3 2021 Retirement Analysis
Rather than raiding their retirement account or taking out loans, Americans indicate their top solutions in the event of a financial setback would be to cut back on other expenses (54%), followed by dipping into their emergency savings (39%).
This is consistent with what Fidelity is seeing in retirement accounts, with a steady decline in savers taking out 401k and 403b loans. Indeed, the percentage of workers with an outstanding loan from their 401k reached a record low 17.3% in Q3 2021, a full percentage point lower than Q3 of last year (18.7%). The percentage of workers with an outstanding 401k loan has dropped in seven of the last eight quarters.
Resolutions good for financial health
Can making financial resolutions improve your economic outlook? Some of 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 research suggests the simple act of making a resolution may actually have a transformative effect, in a number of ways:
While resolutions are an important start, the goal is to keep good financial routines going strong well beyond January—and have them become life-long habits. Based on suggestions from those successful in keeping resolutions this year, the key to success is the good feeling of making progress and setting clear and specific financial goals.
Further, 86% of all respondents felt having a plan in place can help them better deal with the unexpected. For those who work with a financial professional, it can be helpful to set clear and specific financial goals with that person, to help set realistic milestones to achieve those goals—and ultimately, secure greater piece of mind.
“It’s amazing that taking the one relatively simple step of setting a goal can help you feel better about the direction you are headed, but this has been proven to be the case time and again,” said Watson. “Once you’ve set a goal, take the time to develop a plan for how to achieve it. The good news is, there are a number of free resources out there to do just that, which can be helpful—especially for those whose resolution is to spend less in 2022.”
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
