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The holiday season should be a time of ebullience and joy and with the calendar nearing a turn to a new year, it’s predictable that many of us are readying new year’s resolutions.
For many folks, that means new year’s financial resolutions. That can take many forms, be it a plan to invest more, enhance an existing relationship with an advisor or hire an advisor, reduce debt or more diligently save for a home, among others.
In other words, this should be the time of year for optimism, particularly when it comes to personal finances. Financial mistakes and regrets made earlier this year can be viewed as lessons, providing clients with the tools they need for more success in the new year.
Even with those positive possibilities in mind, many Americans are downright gloomy regarding their personal finances in 2024 – a year that has yet to commence. The silver lining is all that pessimism signals opportunity for advisors.
What Advisors Need to Know
A new Bankrate survey illustrates just how somber Americans are feeling about the their personal finances heading into 2024.
“Nearly two-thirds of Americans (63 percent) don’t expect their personal finances to improve in 2024. That includes 38 percent who think their financial situations will remain the same and 26 percent who think their finances will worsen. Nearly 2 in 5 Americans (37 percent) think their financial situations will improve in the new year, slightly up from last year (34 percent),” according to the poll.
Inflation – a familiar culprit – is largely to blame for those dreary outlooks. While it’s accurate that the Consumer Price Index (CPI) is declining, that merely means inflation is rising less rapidly than it did in 2021 and 2022. Plus, while the rate of inflation isn’t rising as fast today as it was a year or two ago, the purchasing power consumers and investors lost in 2021 and 2022 can never be regained.
Then there’s the tangible, kitchen table view on inflation. Simply put, prices for many essential daily goods haven’t fallen back to 2020 levels.
“The biggest reason behind Americans’ financial pessimism continues to be inflation,” adds Bankrate. “Even if inflation is improving, economists say the prices of goods like food and gasoline remain higher than Americans are accustomed to, which is why they may not be feeling immediate relief. That relief is what many Americans are judging their financial outlook on.”
Overall, just 37% of those surveyed believe their personal finances will get somewhat or significantly better next year.
Now for the Good News
Fortunately, there’s reason for advisors to be optimistic as it can be inferred from the study that the some or many of the folks most optimistic in their financial outlooks are likely clients of an advisor.
Add to that, when looking at some of the 2024 financial goals people have for themselves, it’s clear advisors play a pivotal role in getting those boxes checked before 2025 rolls around.
“Nearly 9 in 10 Americans (86 percent) have at least one financial goal going into the new year. Of those that do, the four most common goals cited were paying down debt (22 percent), getting a higher-paying job or another source of income (16 percent), saving more for emergencies (15 percent) and budgeting spending better (13 percent),” concludes Bankrate.
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