New Year’s Day is a traditional time to pause and take stock of our situation in life – our lifestyle, our relationships, our habits, and our aspirations. We ask ourselves, “Am I on course toward my goals, or am I adrift in a sea of poor decisions?” Then we resolve to do better – hence the all-too-familiar impetus to make a list of New Year’s Resolutions.

Analyzing whether or not those resolutions lead to lasting change is a topic for another conversation. However, considering the financial pressure many of not most American households are under these days, it’s no surprise that a high percentage of us will make New Year’s Resolutions revolving around our personal finances.

In a recent article from USA Today, reporter Daniel DeVisé took a look at what kinds of financial resolutions people are making these days, and why. If we examine what’s really going on in a high percentage of U.S. households, including those of retirees, we see some disturbing realities: record high credit card debt, skyrocketing consumer debt of other kinds, and savings rates far below the recommended safety level.

Besides presenting an overview of DeVisé’s observations, we asked Rajiv Nagaich to suggest a financial New Year’s Resolution for 2025. His answer shouldn’t come as a surprise. Let’s take a look.

Sobering Reality: Americans are Worried About Money

“If you want to sober up quick on New Year’s Day,” DeVisé begins, “open your credit card statement. Americans are worried about money. They’ll probably be more worried in the new year, when they wake up, bleary-eyed, after a month of binge-shopping on gifts.”  

Now that we’re on the threshold of a new year, the traditional time for personal reappraisal, people are deciding it’s time to do things differently. “You may not be surprised, then, to hear the most popular financial New Year’s resolutions for 2025,” DeVisé writes. “They represent the opposite, basically, of what many of us do around the holidays, which is spend money and take on debt.”

Multiple Financial Surveys Show a Common Pattern

Writing in USA Today, DeVisé notes that the preoccupation Americans have about the precarious state of their finances has been borne out in at least three recent, separate surveys from three respected sources. Together these surveys represent the views of over 5,200 U.S. respondents. Here’s how the USA Today article summarizes each one.

“In a survey by The Motley Fool, the finance and investing site, consumers named ‘paying off debt’ as their top financial resolution for 2025, especially credit card debt.” This survey included 2000 adult respondents.

“In a survey by Edward Jones, the investment firm, consumers named ‘building a savings account’ as their top financial resolution. No. 2: paying off credit card debt.”  The Jones survey tabulated responses from 3,001 people.

“A third survey, from the personal finance site WalletHub, yielded three top resolutions. Together, they sum up the aspirations of the American consumer: Save more, spend less, and make more money.” WalletHub based their findings on responses from 220 people.

Prioritizing Debt vs. Savings: Financial Planners Differ

As DeVisé observes, the twin priorities of increasing savings and reducing debt dominate the plans of most survey respondents. Both are great goals, financial advisers say.  

“But, which to prioritize?” the article asks. “That’s a subject of endless debate.”

DeVisé spoke with financial planner Robert Brokamp who also advises Motley Fool. His answer says the key is to follow through. “Get that momentum going to where you’re either building up your savings or paying down your debt, whichever you’re trying to accomplish,” Brokamp told USA Today.  

We would point out that this topic of cutting debt and boosting savings is especially critical the closer one gets to retirement. We’ve written several articles for the Blog on the topic of seniors and their growing problems with debt, including this piece about debt consolidation which we presented a few weeks back.

Prior to that, another Blog article made the troubling observation that senior debt is now the highest it has ever been. It’s a harbinger of ominous problems ahead for retirees.

Confidence About the Future Meets Realism About the Past

Despite these facts, almost everyone seems to feel confidence as they look ahead, USA Today notes. “New Year’s Resolutions are aspirational,” says DeVisé, “and many consumers will enter the new year feeling very resolute. In the Edward Jones survey, 81 percent of Americans voiced confidence they can keep their New Year’s Resolutions.” 

That’s all well and good, although, sadly, a bit of hindsight paints a somewhat more pessimistic picture. In the same Edward D. Jones survey, “more than half of the consumers who made resolutions for 2024 admitted that they failed to achieve them.” If past behavior is a guide to future performance, that’s not a cause for celebration.  

Given that reality, DeVisé offers what he says are five financial New Year’s Resolutions, based on suggestions from various sources – along with what he calls “some tips on how to make them stick.”  Again, we would suggest these apply to everyone, but they’re especially urgent the closer you are to retirement.

Resolution #1: Make a Budget for 2025

This suggestion seems like common sense, and it is – but there’s a stark statistical reality behind it. As the WalletHub article referred to earlier points out, “The fact that we’re on pace to end 2024 with over $1.3 trillion in credit card debt is a clear sign that we need to do a better job budgeting.”  Clearly a failure to budget often leads directly to over-reliance on credit cards for day-to-day purchases, with mounting balances that can bleed your checking account.

For those eager for new habits, there are plenty of budgeting tools available. USA Today says Motley Fool’s Brokamp recommends three budgeting apps: Budgets Are Sexy, YNAB (You Need a Budget) and Goodbudget.  Besides that, most big banks offer budgeting apps, including some that will alert you when you’re in danger of going over budget.   

DeVisé writes that, for a rule of thumb, some planners recommend what Investopedia calls the 50-30-20 Budget Rule. Budget to spend half of your income on needs. Set aside 20 percent for savings, leaving 30 percent for wants. Clearly those figures will change based on your personal situation, but the important thing is to find the budgeting tool you’ll use and stick with it.  

Resolution #2: Build Emergency Savings

“Savings accounts come in many flavors,” says DeVisé. “Retirement savings is a lifelong goal. Education savings dominates the parenting years.  But many finance experts consider emergency savings the most important category.”

This, he explains, is a fund you have readily available for those unexpected curveballs life throws at us: the car that fails, the job that disappears, the appliance that breaks down. “Without emergency savings, a fiscal emergency can drive you into debt,” he adds. 

Many financial planners say families should set aside enough readily-available emergency funds to cover three to six months of living expenses. “Readily-available” means the cash is easy to access on short notice without penalty. But many households are woefully short of this goal. 

“A recent analysis by Investopedia, the financial media site, found that the typical U.S. household should have at least $33,000 in emergency savings,” says DeVisé. “Yes, that’s a lot of money.” That same article notes that, among three-fourths of households with checking and savings accounts, the average balance is $8,329 – one-fourth of what’s recommended.

For millions, the outlook is even bleaker. “At least one-quarter of American households have no emergency savings account, Bankrate reports. If you’re in that group, maybe it’s time to start one,” says the article.  

Resolution #3: Look for Ways to Earn Better Returns on Savings

“Not long ago,” says DeVisé, “consumers struggled to find savings accounts, certificates of deposit or anything else that paid 5 percent in guaranteed annual interest. The savings landscape has changed, thanks to elevated interest rates (and higher inflation) in the past couple of years.”

Sadly, many of us are creatures of habit, leaving our savings in familiar accounts with tiny rates of return. But many banks are offering competitive rates with high degrees of security.

“Online banks, which operate mostly without physical branches, now offer an average interest rate of about 3.9 percent on savings accounts, according to WalletHub,” USA Today reports. “It’s not hard to find a yield of 5 percent or better.” (You might want to start by asking your own bank for their best rates on certificates of deposit. You could be pleasantly surprised.)

Resolution #4: Repay At Least 25 Percent of Your Credit Card Debt 

This one sounds a bit surprising, but it actually makes some psychological sense.

According to WalletHub, credit card debt now averages roughly $10,870 per household.

“Paying down that debt can be harder than it sounds,” DeVisé observes. “Let’s say you owe $10,000 on a card at 20 percent interest and want to pay it off by the end of 2025. To do that, you would have to make monthly payments of $926, according to a Bankrate calculator.”  

Instead of setting a goal that’s beyond your reach, why not committing to pay off one-quarter of your balance in 2025 instead? One planner told USA Today that a household with around $10,000 in debt could cut that amount by one-fourth with a payment of about $225 – a much more manageable goal. (Of course, that assumes you have the will power to stop using the card and digging your debt hole deeper.)

Resolution #5: Get Serious About a Retirement Plan

This suggestion from USA Today seems blindingly obvious to us., for the simple reason that so many people fail to plan for retirement – and even those that do have some sort of “plan” in place are usually thinking solely about finances.

“In the 2024 Retirement Confidence Survey by the Employee Benefit Research Institute, only half of workers said they have estimated how much income they will need in retirement,” says DeVisé.  “The easy way to plan for retirement is to work with a retirement planner. At a minimum, experts say, find an online retirement calculator. If you have a retirement or brokerage account, you can probably find a calculator on the website.” 

But focusing on dollars and cents alone is (as Rajiv Nagaich often says) a recipe for disaster.

Rajiv Says, “You Need a Financial Dashboard!”

We asked Rajiv Nagaich to comment on this set of resolutions. He said lists like these don’t go far enough. “If you’re serious about planning for your future – for 2025 and way beyond 2025 – I urge you to make this the year you think about your plans more holistically. Come to a seminar and learn how all the puzzle pieces of retirement fit together. Take action  for your future!”

What’s more, when it comes to finances, the most important item on Rajiv’s suggested list of plans for the New Year shouldn’t come as a surprise.

“I tell everyone to sit down with a qualified, objective financial planner and prepare what we call a financial dashboard. It’s a planning tool that will give you unmatched peace of mind, no matter what happens. If you have to do a financial reset, your dashboard will guide you into making the right decisions.”

Rajiv adds, “Look, there’s nothing wrong with these goals in this article. Get a budget. Boost your savings, Pay down debt. Who can argue with those ideas? The problem is, you’re trying t0 take a journey without a map. Unless you have a tool that will help you reach a healthy place financially, you’re going to repeat the same bad decisions over and over.”

Ready to explore this essential planning concept? Contact us and we can recommend a qualified planner to help you. That’s one resolution that belongs at the top of your list for 2025!

Rajiv Nagaich – Your Retirement Planning Coach and Guide

The long-awaited book by Rajiv Nagaich, called Your Retirement: Dream or Disaster, has been released and is now available to the public. Retirement: Dream or Disaster joins Rajiv’s ground-breaking DVD series and workbook, Master Your Future, as a powerful planning tool in your retirement toolbox. As a friend of AgingOptions, we know you’ll want to get your copy and spread the word.

You’ve heard Rajiv say it repeatedly: 70 percent of retirement plans will fail. If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families – and you want to make sure it doesn’t happen to you – then this book is must-read.

Through stories, examples, and personal insights, Rajiv takes us along on his journey of expanding awareness about a problem that few are willing to talk about, yet it’s one that results in millions of Americans sleepwalking their way into their worst nightmares about aging. Rajiv lays bare the shortcomings of traditional retirement planning advice, exposes the biases many professionals have about what is best for older adults, and much more.

Rajiv then offers a solution: LifePlanning, his groundbreaking approach to retirement planning. Rajiv explains the essential planning steps and, most importantly, how to develop the framework for these elements to work in concert toward your most deeply held retirement goals.

Your retirement can be the exciting and fulfilling life you’ve always wanted it to be. Start by reading and sharing Rajiv’s important message. And remember, Age On, everyone!

(originally reported at www.usatoday.com)