Americans pledge to make positive changes to finances in 2024, says Allianz

Millions of Americans will be making a new year’s resolution to improve their finances according to new research.

With the impact of interest rates and inflation pressuring household budgets and increasing stress, the Allianz Life study reveals that almost half of respondents say they are likely to make and keep a resolution to manage their money better or save more in the coming year, a larger share than in the previous two years.

Millennials are most keen to shore up their finances (59%), compared to Gen X (39%) and boomers (30%), but across all generations the priorities are increasing savings and paying down debt. This includes building up emergency funds, reducing credit card debt, and boosting their retirement savings.

The positive actions planned for 2024 continue the trend reported by poll participants in 2023 including reducing spending, seeking opportunities for extra income, and meal planning to reduce eating out costs.

However, buying things they don’t need, not saving enough, or not saving anything are the biggest bad habits acknowledged over the past year.

“Many people often know that their long-term financial strategy needs to improve but need help to take action,” says Kelly LaVigne, vice president of consumer insights at Allianz Life. “The first steps often include creating a written financial strategy that can serve as a guide to achieve goals like retirement and mitigate risks to those milestones. The guidance of a financial professional can be crucial for Americans to take positive steps for their financial future.”

RISING STRESS

The stress that not keeping on top of finances brings is clear, with 40% of respondents saying they are more stressed this year than last, led by Gen Xers who may be considering retirement challenges.

The top financial stressors are costs of day-to-day expenses (61%), income or retirement income too low (44%), and too much debt (34%).

The challenges of tighter budgets has led to some changes to financial plans:

• 29% say their pay increased from a raise or changing jobs in the last year. And, of those who received a pay increase in 2023, 73% say that even after that increase, their pay still isn’t keeping up with inflation.
• 23% say they put off making a big purchase like a house or car due to rising interest rates. Millennials were most likely to put off a purchase (33%), compared to Gen Xers (19%) and boomers (18%).
• 69% say they are concerned that the rising cost of living will affect their ability to save as much for retirement as they should.

“For long-term financial stability, Americans need to have a plan to mitigate the effects of rising cost of living,” LaVigne said. “While inflation has slowed from recent highs, inflation isn’t going away. You need to protect yourself from inflation risk long-term.”

RETIREMENT WAVE

Next year is set to see a large cohort of new retirees, with more than one in five Americans who are currently employed say they are likely to retire in 2024, up from 17% in 2022. Among boomers who are currently working, 31% say they are likely to retire in 2024, up from 25% in 2022.

As Americans consider retirement, their top strategies for boosting savings include downsizing their current spending (34%), putting money in a financial product that would protect retirement savings from market drops (23%), and developing a plan to address the rising cost of living in retirement (21%).

However, the study found that many are constrained by the burden of student loan debt.

About one in five millennials (19%) said they restarted paying federal student loans in 2023, with 82% saying that having to restart paying student loans will make it hard to make ends meet, and 66% saying they have had or will have to reduce retirement contributions in order to restart student loan payments.