How do you set money goals after a year like 2020?
When I was making resolutions this time last year I couldn’t have anticipated the 10 months of 2020 that my husband would be out of work, or the 7 months that my business would essentially be shut down, or leaving behind our beloved New York City apartment.
It’s been a year of loss and uncertainty for so many Americans, with two thirds reporting a financial setback in 2020, according to Fidelity Investment’s newly released 2021 Financial Resolutions Study.
So it’s not surprising that 29% of Americans say they’re in a worse financial situation now than they were at the start of the year.
That said, 65% of respondents are still considering financial resolutions for the New Year – and I am one of them.
While I may not know when my husband will return to work, or whether my business will continue it’s post-lockdown recovery, or when we’ll be able to return to our life in Manhattan, I’m setting resolutions for 2021 as a practice of financial optimism.
Research shows that optimism pays – literally. Optimists are more likely to have an emergency fund, to enjoy greater career gains and higher incomes, and to experience less financial stress.
To be clear, financial optimism isn’t about ignoring the difficult realities many of us are facing in this moment – it’s about believing that we have the ability to face those challenges and improve our lives in spite of them.
Financial optimism requires us to acknowledge that our setbacks are temporary rather than permanent, and to recognize that our financial circumstances are not the result of a personal failing or fundamental character flaw. In fact, feeling shame about our financial circumstances – be it a job loss or a debt balance – can actually make it more difficult to regain control over our financial futures. Research shows that shame can trigger a fight or flight response – diminishing our ability to process information, spiking our anxiety and encouraging us to withdraw rather than engage.
So to practice of financial optimism, it’s critical that we shift our focus from our financial shortcomings, mistakes and bad situations, to what is working in our financial lives and where we can make progress.
With that in mind, here’s how I’m going about setting resolutions for 2021.
With so much ongoing uncertainty as we enter the New Year, it can be hard to commit to some of our standard financial goals. Exactly how much some of us can save may be vastly impacted by the spread of Covid and the impact on businesses and whether or not there is any additional stimulus passed and how soon vaccine distribution allows us to return to some semblance of pre-pandemic life, which could still be months away.
Rather than waiting around to see how it all shakes out, I’m setting resolutions now with a focus on committing to specific actions, rather than specific outcomes.
For example, I might not be able to commit to investing a specific percentage of my paycheck each week until I know more about how business will look in 2021. But I can commit to tracking all of our money each week and sitting down at the end of each month to figure out just how much I can afford to set aside given the most up to date information and projections we have.
Establishing the habit is more important than the amount.
Whether it’s saving, investing or paying down debt – by focusing on your actions as opposed to your outcomes, you can approach 2021 as an opportunity to refine your foundational money habits – from tracking everything you spend, to consistently reviewing your progress, to reevaluating your savings strategies and goals on a regular basis.
According to Fidelity Investments’ 2021 Financial Resolutions Study, 38% of Americans anticipate they’ll still be in survival mode in 2021 – with one in six Americans reporting recovering from financial losses due to the Covid-19 among their top financial resolutions.
With so many ongoing challenges and unknowns, it’s important to anticipate the inevitability of setbacks and mistakes – which can happen even under the best circumstances. Practicing financial optimism and self-compassion, and avoiding shame and self-blame are important tools for staying resilient.
To cultivate the practice of financial optimism, celebrate your money wins. Recognizing where you’re succeeding in your financial life and building upon that, is a valuable tool for staying motivated and optimistic, particularly in challenging times.
While small habits like reviewing your bank statements each week might not solve all of your financial challenges overnight, it’s important to recognize the wins these positive financial habits enable. Even simple things like consistently paying your bills on time and stashing away a few dollars in savings can help propel you to bigger wins over time – training your brain to focus on progress rather than perfection.
According to Fidelity Investments’ recent Moving Forward study, 58% of respondents say they are financially preparing differently for the New Year.
2020 has obviously shifted a lot of financial plans and timelines. As we move into 2021, it’s important that we continue to stay flexible so we can adapt to our new realities and adjust as necessary.
This time can be an opportunity to step back and reconsider your priorities. Are major milestones like a purchasing a home still on your short-term horizon, or do you want to focus more on building emergency savings and paying off your student loans?
If you’re not sure where to begin, what to prioritize or how to adjust your financial plans to the ongoing changes in the world, consider tools and resources that can help.
I’ve collaborated with Fidelity Brokerage Services on the launch of their new app Fidelity Spire – a free app that’s specifically designed to help you plan, save and invest smarter to reach your goals.
The Fidelity Spire app® not only helps track progress toward goals, it also adjusts the goals as circumstances and priorities change. So you can add goals, delete goals, and use the decision tool within the app to help figure out which goals to prioritize – which is great when wondering things like, how much should be set aside for retirement while still paying down student loans. Or how much to save toward a vacation while also building up an emergency fund.
If you want to try using the Fidelity Spire app to help you plan, save, invest, you can just download the Fidelity Spire app on your phone and get started now.
With 2021 on the horizon, and our resolutions starting to take shape, having a tool that can help prioritize short-term and long-term goals and identify the best approach to achieving them can certainly come in handy.
While our goals and priorities are likely to continue shifting over the course of the year, identifying a few key priorities can help serve as a guide as we start making plans – giving us something to track our progress against to stay accountable.
While there’s still so much we don’t know about what 2021 will look like and how our plans and priorities will ultimately shake out, what we do know is that we can stay committed to the processes and habit of engaging with our finances. And that’s a win we can always build upon.
This post is sponsored by Fidelity Brokerage Services, Member NYSE, SIPC. 900 Salem Street, Smithfield, RI 02917