The good thing about New Year’s resolutions is that by February you can forgive yourself if you’ve dropped most of them.
Financial resolutions — just like ones to lose weight or get more organized — can be hard to follow. But not following them can lead to more problems than gaining a few extra pounds or having a messy office. They can lead to poor credit, which can make it more difficult to get loans, among other things.
Americans have plenty of things to worry about in 2013, according to a recent survey by the National Endowment for Financial Education, done in partnership with Credit.com.
Big-Ticket Items Ahead
The online survey of 2,132 U.S. adults shows they see plenty of financial hurdles in 2013. Of the expenses they anticipate, paying off debt was the highest issue for 39% of respondents. That was followed by transportation expenses (such as paying off a car, buying a new car and vehicle maintenance) at 35%, home expenses (not including a mortgage) at 33%, and medical expenses at 25%.
Dealing With Setbacks and Major Expenses
Even with hopeful financial resolutions, the reality of life and all of its expenses can set in. In 2012 the majority of adults (62%), said they had major expenses and financial setbacks. The reasons were numerous, including transportation (20%), housing repairs (19%), medical care (16%), falling behind on bill payments (12%) and job loss (11%).
When faced with major unexpected expenses, consumers seemed to be evenly divided on their financial preparedness, planning to deal with these issues by: paying with cash (32%), tapping into emergency savings (31%) or using credit (30%).
Other ways they would pay for such expenses included taking out a loan from a bank or credit union (17%) — with men more likely to do this than women; and borrowing from a friend or family member (16%), with women more likely to do this.
Plans for the Future
So are consumers aiming to create a brighter financial future for themselves? It seems so, at least for many. At the start of 2013, 62% of U.S. adults planned to make a financial resolution. The resolutions include setting and following a budget (39%), making a plan to get out of debt (32%), establishing savings (28%), boosting retirement savings (27%), pulling a credit report and learning how to improve their credit score (13%), paying off student loan debt (13%), getting a new credit card (8%), and refinancing or paying off a mortgage (7% each).
While women are bigger savers, men want to do more of their savings for retirement, the study found. Of those with New Year’s financial resolutions, women are more likely than men (32% vs. 24%) to establish savings, while men (30% vs. 23%) are more likely to want to boost their retirement savings.
One problem with following a financial resolution set in January is that it can take several months to get a snapshot of spending patterns, says Paul Golden, spokesman for NEFE. So for now, it remains to be seen whether these resolutions will stick.
As for the Credit Report…
Having resolutions and following through on them — as every dieter knows — can be difficult. While the NEFE/Credit.com survey didn’t ask respondents whether they followed through on their resolutions from last year, it does show that most didn’t learn much from their credit report in 2012.
It found that 44% received a credit report last year, and of those, it says 32% didn’t take any action on it. Only 10% received their credit report in 2012 and took steps to improve their credit score, while 4% disputed an item on the report.
While 28% didn’t receive a credit report last year, 16% plan to get one this year. Five percent don’t know how to receive one.
Pulling a credit report should be done annually (and some experts say it should be done more frequently), and the 28% figure of people who didn’t get a credit report last year should be much lower, Golden says.
Experts recommend that consumers check their credit reports regularly to be sure that their credit activity is being accurately reported, and to monitor how their own credit behavior affects their credit score. Regular monitoring of credit reports can help consumers spot fraud and errors, and correct the mistaken information so that it doesn’t have a negative impact on their financial future.