It’s late December so new year’s resolutions are top of mind for many people, including clients and investors of all stripes. That’s to be expected because the arrival of each new year brings with it opportunity to improve upon the things we did well in the prior year and “fix” some of the areas we didn’t get right.
In most years, financial resolutions top resolutions lists, but in a trend advisors should be aware of, many Americans are eschewing financially motivated new year’s resolutions. However, they aren’t passing on financial goal-setting.
It’s not about phrasing as much as it’s about some of the negative connotations associated with new year’s resolutions, financial and otherwise. Think about it. Every year people resolve to exercise more and their Pelotons become storage racks. They resolve to give up bad habits and by late January or early February, the effort to quit is abandoned.
Point is resolutions often fail, but when people approach goal-setting differently. They want to check the box or reach the finish line and that’s particularly true when it comes to finances. Just don’t call those financial objectives new year’s resolutions.
Financial Resolutions Are Like All the Rest
Believe it or not, financial resolutions are comparable to eating betting, exercising more, getting more sleep, quitting smoking and other common new year’s resolutions in that people throw in the towel more than they’d care to admit. A new survey from Beyond Finance confirms as much.
“83% of Americans let some or all of their financial New Year's resolutions from last year slip, with just 19% able to maintain their goals throughout the year and 38% percent abandoning their resolutions about finances within the first three months, reinforcing a familiar pattern of early-year burnout,” according to the poll.
About half of the more than 2,000 respondents said they’re moving ahead of with financial new year’s resolutions, but 45% admitted they see little value in those resolutions.
“January may still feel like a reset, but Americans have stopped believing it leads to lasting financial change, " said Dr. Erika Rasure, chief financial wellness advisor at Beyond Finance. "People aren't failing at resolutions because they're bad at sticking to them, but because goals don't tend to stick around if they aren't aligned with a person's values from the get-go. Rather than giving up on resolutions, dig deeper to understand what values shape your attitude toward money and work to address how they can improve your money management and financial wellness."
Advisors Needed
As noted above “new year’s resolution” has some negativity associated with it with most of it attributable to the lack of follow through. However, advisors can help on this front because “resolution” isn’t common wealth management vernacular, but “goal-setting,” “objectives,” “planning” and “priorities” are. Put in those terms, financial resolutions sound more urgent and more importantly, more attainable.
Further underscoring the opportunity set for advisors on this value-add-laden front is that while many folks want to set financial goals and realize those objectives, they don’t trust themselves to do so. Working with an advisor ameliorates that scenario.
“Nearly 50% indicate they only somewhat trust themselves to make financial decisions and follow through on them,” concludes Beyond Finance. “At a personal level, consumers aren't just stressed about finances. They lack confidence in their own judgment. Nearly half of people only "somewhat" trust themselves to make and follow through on financial decisions, and more than one in four don't trust themselves with a credit card. It signals financial anxiety driven by fear of mistakes, loss of control, or past missteps.”
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