Short-term financial stressors like paying off credit card debt and creating emergency funds have taken priority over long-term goals like retirement and college savings, a new study by Fidelity Investments found.
In Fidelity’s 14th annual New Year’s Financial Resolutions Study, the firm found that 53% of Americans are focusing on short-term savings goals over long-term goals for the first time in the study’s history. That means goals like retirement and college savings have been pushed to the back burner.
“My hypothesis is that people are feeling the pinch of things being more expensive, they’re reading the tea leaves on job security and the headlines on the economy. For younger generations that haven’t experienced a market correction, it can feel extra scary,” said Meredith Stoddard, vice president, life events planning at Fidelity Investments.
“My hope is that people don’t turn a temporary pause on long-term savings into a permanent pause. It’s about habits. If you’re used to extra money being in accessible savings accounts, it can get hard to shift that money back towards long-term goals. Make sure you go back and look at your finances at regular intervals – a cadence that works for you – and adjust. Have periodical check-ins so that months don’t turn into years,” Stoddard said.
The study found that Americans will be approaching 2023 with more caution and pragmatism than previous years, following a year filled with market volatility, high inflation and surging interest rates. Fidelity found that more than a third of Americans say they’re in a worse financial situation than last year and only 65% believe they’ll be better off in the coming year. That compared with 72% in the last study.
For those in worse financial shape than last year, more than half (58%) attribute this to inflation. Among those who experienced a financial setback, 44% of those had to dip into their emergency fund.
Read: Did you tap into your emergency fund? Don’t panic. 7 steps to build it back up.
As the new year approaches, 66% of Americans are considering a financial resolution for 2023, Fidelity found. Of those planning a financial resolution, an overwhelming majority (94%) say they’re approaching it differently with nearly half (45%) are considering more conservative goals for the year ahead.
Despite this new mindset, the top resolutions remain consistent with past years: save more money (39%), pay down debt (32%), and spend less money (28%).
“Even if the focus for now is understandably on more immediate needs, our long-term goals and objectives are what keep us going — and planning can help,” said Stacey Watson, senior vice president of life event planning, Fidelity Investments.
“Taking charge of your financial situation is a great way to help you feel a sense of control, even when external forces bring challenges. If you are able to, saving more and paying down debt, even small amounts, can have a tremendous impact on the financial and emotional well-being of a household,” Watson said.
Inflation remains top of mind, with Americans’ top financial concern being inflation’s impact on their day-to-day expenses and saving (43%), followed by economic uncertainty/recession (39%) and unexpected expenses (38%), Fidelity said.
When asked to describe their expectations for 2023, 29% described their outlook as ‘the year of living sensibly.’
“After the stresses of the last few years, Americans are understandably taking a pragmatic view of their financial situation,” Watson said.
“This is an encouraging indication of the grit and resilience we can tap into when the financial going gets tough. Given the ups and downs experienced, being creative and establishing new financial wellness habits are positive signs many are finding ways to shift the focus, to pay down debt or build up emergency savings. Proper planning, and balance, are key,” Watson said.