3 New Year’s Resolutions that Reflect Reality

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What a difference a year makes. The economy is struggling longer than many had expected, and now Americans are retooling their New Year’s resolutions to fit the times.

This year’s top financial resolutions are “save more” and “spend less,” according to a Fidelity Investments survey. No shocker; those have topped the list since the financial crisis. But “pay off debt” leaped into third place, displacing “make a budget,” and the median annual target of $2,400 additional savings is double what it was last year.

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In a sense, this is all academic. Only one-in-10 who make a New Year’s resolution stick with it a year. Many don’t make it a month. Besides, these financial resolutions are so tightly bound as to be pretty much the same thing anyway. Can you really save more without spending less? Isn’t paying off debt a lot like saving more? Budgets, of course, help make it all possible.

Long-term savings goals haven’t budged. The top priorities remain to save for retirement in an IRA or 401(k), for college and for retiree medical expenses. What has changed, though, are short-term savings resolutions, which clearly reflect the enduring slowdown. The biggest jumps, according to Fidelity:

  • Save for a home improvement Those resolved to sock away money to fix the roof or buy a new fridge rose to 45%, compared to 26% last year. This illustrates a growing recognition that because of a weak housing market you may be stuck in the home you already have for the foreseeable future.
  • Build an emergency fund Another big jump (to 65% from 50%) was in those resolved to build an emergency fund equal to six months of living expenses, a recognition of the tough job market and general job insecurity.
  • Down payment Saving for a 20% down payment on a new house has moved up the resolutions list, reflecting the new realities of tighter bank lending practices. The days of liar loans, negative amortization mortgages and 125% financing are long gone. Good riddance.

There’s more frugal news in this New Year’s resolutions survey, which shows Americans adjusting to the times. For example, resolutions that fell off a cliff in the survey include saving for a new car or luxury purchase.

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The best news may be that we seem to be truly resolved this time around. Numerous studies have shown that Americans are paying down their debts, and this one is no different. Nearly one-in-three said they owe less today than they did a year ago. Maybe, for a change, we should just resolve to do more of what we’ve been doing.