The pandemic and its resulting economic turmoil has many Americans focused on merely surviving financially these days, an attitude that clearly emerged in a new study released today.
Nearly four-in-10 (38%) Americans responding to Fidelity Investments’ 2021 New Year Financial Resolutions Study say they’ll spend 2021 in “Survival Mode,” meaning they’ll focus on the day-to-day to try to get themselves and their families through the next year. This outlook is more common among older generations (42% and 43% of Gen X and Boomers, vs. 25% of Gen Z and 34% of Millennials), and women (42% vs. 34% of men).
According to the study, more than two-thirds of Americans experienced financial setbacks in 2020, often from the loss of a job or household income or another emergency expense. Even those lucky enough to maintain their income still may have had to tap savings to help others, as nearly one-in-five attribute their financial setback to providing “unexpected financial assistance to family members or friends.”
Despite this, many Americans remain optimistic and determined to make their money work harder in the New Year, with 72% confident they’ll be in a better financial position in 2021.
“Americans are clearly ready to leave 2020 behind and start 2021 off on the right foot, including when it comes to their finances,” said Stacey Watson, senior vice president with oversight for Life Event Planning at Fidelity Investments. “This year’s top financial resolutions are consistent with what we’ve seen in the past; however, what makes 2021 unique is howpeople will achieve them, given the financial pressures and major life events many continue to experience throughout the pandemic.”
Younger gens prioritize financial resolutions
This year, 65% of Americans are considering a financial resolution for 2021, which is down marginally from last year (67%), but still quite strong given the headwinds experienced by so many families. Younger generations appear to be more committed to actively improving their finances in the new year, with 78% of all Gen Z and Millennial respondents considering a financial resolution compared to 59% of all Gen X and Boomers.
“Younger generations are building up their careers, families, and finances, so it makes sense they have important financial resolutions to make. Still, Gen Xers and Boomers also experienced significant financial challenges in 2020 and may want to consider making some resolutions of their own to build a stronger financial future, particularly when it comes to retirement readiness,” Watson said.
The fact Americans’ top financial resolutions are consistent with prior years is a reminder that the fundamentals of building financial stability remain consistent in all types of environments. Notably, though, one-in-six respondents this year listed recovering from “financial losses due to the COVID-19 pandemic” as among their top financial resolutions for 2021.
When asked what motivates them to make financial resolutions, 56% indicated “greater peace of mind,” demonstrating the critical link between financial and emotional wellness.
Making a resolution, and checking it twice
Resolutions are an important start, but the key is to keep good financial routines going strong well beyond January—and ultimately have them become life-long habits. The study reveals the key to a successful resolution is the good feeling of making progress and setting clear and specific financial goals.
Having someone to help keep them on track and hold them accountable also plays a role, as nearly one-in-five indicated this was a major reason they were able to stick to a financial resolution last year. In fact, more than three-quarters (77%) of people working with a financial professional were able to stick to their financial resolution in 2020, compared to just half (50%) of those who did not work with one.
Coping with financial uncertainty
The study also provided additional proof regarding the impact COVID-19 has had on families’ financial stability, as nearly one-third (29%) of Americans indicate they are in a “worse” financial situation compared to last year, versus only 19% who said the same in 2019 about the year prior.
When faced with financial setbacks in 2020, the most common solutions were to “cut back on other expenses” (45%), “use my emergency savings” (37%), or “take on debt using credit cards or personal loans” (23%). One-in-five “borrowed from friends or family,” with Gen Z and Millennials most likely to either borrow from or move in with family members.
SEE ALSO:
- Americans to Prioritize Health & Wellness over Finances in 2021?
- Feelings of Financial Security Stable Despite Volatility
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.
