With the new year still young, resolutions remain top of mind, and improving finances rank among the most common goals for Americans. We recently took the pulse of the nation and Southern California to find out more, and the results were encouraging, but also offer insight into how financial institutions can offer a helping hand to people wanting to become more financially fit.
More than 80% of Americans said they made a resolution for 2020, according to OneWest Bank’s New Year’s survey of more than 2,000 consumers in partnership with Harris Poll, conducted in mid-January. Among this group, Southern Californians were more financially focused than the national average, with 74% saying that saving more money is a top resolution, compared with 57% of all respondents nationwide.
The focus on saving money far outpaced other resolutions. Among Southern Californians, 47% said losing weight was a top goal, followed by 35% listing spending more time with family or friends.
There are also promising signs among Southern Californians in terms of becoming more financially disciplined. About 60% said that setting a spending limit on a debit or credit card is the resolution they would most likely keep in 2020. Around 37% said downloading a budgeting app was the resolution most likely to keep, and 30% said so for enlisting a buddy for accountability.
The Challenge of Adopting a New Behavior
Yet whatever the resolution, let’s face it, setting new habits—or breaking old ones—isn’t easy. Over half of Southern Californians say bringing their lunch every day—which requires discipline—is easier than keeping a financial resolution. And 30% said it would be easier to lose 10 pounds, and 16% said running a marathon would be easier!
Our data also showed that some resolutions undermined others. About 80% of the Southern Californian respondents said they’ve spent funds in 2020 to keep a resolution, such as gym memberships and vacation bookings. Yet 28% spent $501 or more, which could be eating away at savings rates. By contrast, only 16% of U.S. consumers have surpassed $500 or more in resolution spending.
Yet the good news is new habits come with sustained focus on goals. Writing them down in a notebook or piece of paper makes it more tangible and more likely you’ll follow through. The “distance is through simple steps, such as organizing contexts around you to encourage enjoyable actions that meet your long-term goals,” writes Wendy Wood, a professor of psychology and business at the University of Southern California, and author of the book “Good Habits, Bad Habits, the Science of Making Positive Changes that Stick.”
In that vein, for saving money, one of those simple steps to reach a goal is to set aside money on a regular basis in a separate account. You can set up auto-transfers to do this. Or you can physically do it yourself via the computer to help cement the physical act of making transfers on a regular basis.
Our polling also showed good news here: of those who made a financial resolution in 2020, 64% said they are somewhat or very likely to open a new account to help meet financial objectives. Money market accounts offer a good vehicle for this since they pay interest and can be linked to checking accounts. For example, OneWest’s Premium Money Market account offers an annual percentage yield of 1%, with up to $300 cash bonus for new customers.
As part of saving more money in 2020, here three key things to increase to focus on in this new year:
Build an emergency fund. You should have on the sidelines at least six month’s-worth of expenses. There’s of course the standard unexpected, such as car trouble, dental work, or a trip to the hospital. But California also presents other risks such as forest fires and earthquakes, either which could cripple your employer overnight if a disaster hit your areas. The emergency funds should be kept readily available by putting them in a money market, which will pay interest. Link the funds to your checking account. And write down a monthly goal to transfer to the account.
Tally your monthly expenses. There are plenty of apps that will help you do this. But you can also use a spreadsheet or even a yellow legal pad—whatever works best for you. The list of expenses will help you see where what’s really eating into your budget. Often you’ll find things you’re not using that much. Look for subscriptions to cancel, such as streaming services, cable, and a variety of other purveyors, from beauty products to razors to dinner boxes. Find ways to cut back on eating out. Some credit cards will let you set spending limits.
Save 10% of your gross income. This might sound unattainable at first, but once you start cutting expenses, you’ll be well on your way. If you can’t get to that level now, set a time goal to get there, such as six months from now. This will help you pay down debt, build your emergency fund, and invest additional proceeds to build wealth. Think of it, for every $50,000 in income, you could put aside $5,000. That will add up quickly.
Everyone should be taking stock of their financial picture on a periodic basis, so why not now? Rely on your financial institution to help you instill new habits. Keep focusing on the resolution of saving more money in 2020, and watch the funds grow in your accounts.
OneWest Bank is headquartered in Pasadena.