Why ‘Save More Money’ Is a Bad New Year’s Resolution

New Year’s resolutions are a reset, a refresh button that may help us feel virtuous and energized — even momentarily.  And financial resolutions are big on the New Year’s list, with 39% of Americans saying they want to “save more money” in 2023, according to a Fidelity Investments survey.

But some experts argue that this resolution — which is the top financial one, according to the survey — is not an especially good one, chiefly because it is too vague and won’t motivate people to stick to it.

Set Clear and Specific Goals

With the backdrop of a particularly uncertain economic landscape and fears of a recession, 2023 might be the year when Americans should set even clearer financial goals.

“You need to make specific resolutions. Really, any financial goal you have should be specific,” said Kelly LaVigne, vice president of consumer insights at Allianz Life. “That way, you can figure out the smaller incremental goals to set to help you get there. Otherwise, you’re working toward this far-off goal without feeling like you’re really making any progress. That’s discouraging.”

LaVigne added that people need to know the difference between a resolution and an ultimate lifetime goal. For example, an ultimate lifetime goal is to save enough money to have a comfortable retirement, while a resolution could be to increase contributions to a 401(k) plan by 1% for the next year.

Make Your Money Work for You

To put resolutions and the difficulty in sticking to them in context, Inc. reports that 80% of people who make New Year’s resolutions have dropped them by the second week of February. So, the more incremental and clearer the resolutions, the better.

Vague Resolutions Are Not Helpful

What’s more, setting a vague resolution may do more harm than good; with unclear goals, people tend to have little direction, which may cause uncertainty and anxiety, said Mark Reyes, CFP and senior manager of financial assistance at Albert.

“With financial goals, ideally, you want to set specific targets and timelines so that you can have checkpoints throughout the year and make the necessary adjustments to progress,” Reyes said.

Reyes added that these are hard to stick to because you’ll never really know when you’ve accomplished them.

 “‘Save more money’ could mean saving a dollar or $100,000 by the end of the year. It’s not clear,” he said. “Also, this goal doesn’t indicate why it’s important to you. If you don’t know why you’re saving, it may be harder for you to persevere throughout the year to achieve your goal.”

Instead, he suggested, you can say: “Save $3,000 for an emergency fund by the end of summer 2023 to stop living paycheck to paycheck.”

The sentiment is echoed by several experts who say “saving more money” oversimplifies and glosses over some key things we all need to be doing.

Make Your Money Work for You

“It leaves out the fact that aside from emergency savings and short-term goal targeted savings, we need to be investing our money in order for it to grow,” said Bobbi Rebell, CFP, personal finance expert at Tally and author of “Launching Financial Grownups.”

Some Better Resolutions

So, what can Americans do instead, and which other financial resolutions can they set that could be more fruitful?

Pay Debt

One of the top ways people want to improve their finances includes paying down credit cards; 17% want to do that, according to the 2023 New Year’s Resolutions Study from Allianz Life Insurance Company.

Tally’s Rebell said anyone without a solid emergency fund needs to make that their first priority. The second thing to look at is debt.

“If they have expensive debt, such as credit card debt,” she said, “paying it down in a systematic way is essential.” 

Credit card interest rates are exploding: The average credit card charged 19.77% as of Dec. 28, 2022, according to Creditcards.com data. That is an eye-popping 3.64 percentage points more than in December 2021.

Track Your Money

Some experts say a better resolution would be to track your spending for the next two to three months, which will help you know where your money is going. 

“Then you can use that information to develop a written financial plan,” Allianz’s LaVigne said. “The end goal is to develop a plan.” 

For example, you might find that you have unused subscriptions, make unnecessary impulse purchases or eat out more than you want to admit, LaVigne explained, adding that there are many ways you could improve your budget. You won’t know until you track where your money goes.

After a few months, this information will enable you to establish a strong goal.

“Changing money habits takes time; you have to start small,” LaVigne added. “And then, once you get to one of those small goals, give yourself a reward and then move forward to the next bigger goal.”

Save for Retirement

Increasing retirement savings is also one of the top financial resolutions for 2023 for Americans, with 14% of them citing this, according to the Allianz survey.

“Saving more money, if you can afford it, should not be a New Year’s resolution; it should be a lifestyle revolution,” said Ryan Naples, senior manager of Public Policy at DailyPay.

With four in 10 Americans saying they doubt they will have the necessary funds to retire, Naples said, it’s imperative to create a comprehensive, life-changing strategy to build your nest egg.

“To start, ask your employer or bank to help set up an automatic savings program deducting from your pay,” he said. “Increase the contribution in parallel with any salary increases. This savings program should run in concert with a 401(k) program, if one is available to you. Establish a minimum annual goal and stick to it as if your future depends on it. Because it does.”

Do Resolutions Need To Be Different According to Age Group?

The answer: It depends on whom you ask.

According to LaVigne, they should, because your financial situation changes as you age.

“When you are first out of school, your focus is on paying off student loans or saving that first emergency fund,” LaVigne said. “Then as you start to earn more, you may start saving for a down payment for a house. Then the focus may shift to saving to send children to college. And then, as you approach your highest earning years, you save more and more for retirement.”

Other experts argue that resolutions don’t need to differ by age group — rather, they should resonate with your specific financial situation and motivation.

“It’s more important to understand why you are setting a goal,” Reyes said, “and why you need to make certain changes to achieve the resolution.”

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