We’re ending the third full week of the new year. Have you broken your New Year’s Resolutions yet? According to a study by Fidelity, 65 percent of Americans have made financial resolutions. But half of Americans surveyed indicate they’re overwhelmed by personal finances, and 30 percent say they have a stressful relationship with money. That makes accomplishing the three most common financial goals pretty challenging – saving more, spending less and paying down debt.
It seems younger folks are more likely to make a financial resolution than older folks. And young folks are more optimistic, saying they believe they’ll be better off financially in the coming year. But inflation is making accomplishing those goals more difficult. I chatted with Rita Assaf, Fidelity’s Vice President of Retirement Products about how to overcome those challenges.
Deanna Dewberry: “November’s CPI [Consumer Price Index] was 2.7 percent. December’s CPI was 2.9 percent. We cannot seem to get sticky inflation down to the Fed’s 2 percent target. For those who are worried about the day-to-day, paying bills, what’s your advice?”
Rita Assaf: “We have found that 72 percent say that they have a plan in place to reach their financial goals, and almost 80 percent are focused on building emergency savings in the year ahead. And these are just two great ways that are helping to address the concerns that you just mentioned. And another key concern that we hear about is tackling debt. And one way to do that is to budget which we know is not fun and we know is not easy. But Fidelity suggests spending no more than 50 percent of your take home pay on essential expenses like food and housing.”
And that brings us to the 50-30-20 rule. Financial experts say 50 percent of your budget should go toward needs; 30 percent toward wants like streaming services and clothes, and 20 percent toward savings.
Budgeting is key. Evaluate how much money is coming into your household and how much is going out, then cut the fat. First and foremost, make a plan and put it in writing, creating a contract of sorts with yourself, your partner and the kids.
Set small goals first and build on them. For example, perhaps you can just tuck away $50 a month. Every time you accomplish that goal, celebrate it. I reward myself with my BBB, a bubble bath and a book. We can build financial freedom in 2025, one paycheck at a time.
