Chances are, your social media feed may be filled with friends sharing their New Year's resolutions for 2024, and there’s a good chance that among most of those resolutions, there's a financial goal tucked in there, too.
Whether it's building up their savings, paying down debt, or cutting back on spending, many Canadians are setting financial goals for 2024.
According to the TD 2024 Financial Outlook survey, 60% of Canadian respondents said they have a financial resolution for 2024. When it comes to new Canadians aged 25 and older who arrived in Canada in the last five years, 97% said they have set a financial resolution for this year.
Across both demographics, roughly 30% of respondents said they are looking to build up their savings as much as possible this year – which is likely a reflection of current economic concerns around inflation and the rising cost of living, said Emily Ross, VP, Everyday Advice Journey at TD.
Among Canadian respondents who said they are hoping to build up their savings, roughly one in four said they want to pay off credit cards or debt, while another 25% said they are hoping to cut back on spending. One in 10 respondents said they are looking to invest more in 2024 and 5% want to create or build an emergency fund.
The findings are similar when it comes to new Canadians surveyed and their savings goals. More than 90% said they plan to cut back on spending, with almost 40% of respondents saying they want to cut their spending by up to $500 per month. Twenty-eight per cent of new Canadians surveyed plan to cut spending by $1,000 per month, and 23% said they are aiming to trim $2,000 from their monthly spending on things like entertainment, eating out and buying brand-name goods.
“The number of Canadians who are planning to cut spending is quite meaningful,” Ross said.
"It’s an increasingly challenging economic time for Canadians coming out of a holiday season and into the New Year. The impacts of inflation have been compounding for quite a while now, and debt levels increased in 2023, according to a TransUnion report. I think the survey findings show many Canadians are looking to move towards more sustainable spending habits.”
Why financial resolutions are important
There’s plenty of research on the relationship between finances and wellness. According to a 2022 study by market research firm Leger, one in three Canadians surveyed said financial stress caused them anxiety, depression, and other mental health issues. What’s more, nearly 50% of Canadians polled said they have lost sleep because of financial worries, according to data published by the Government of Canada.
While Ross said setting financial goals shouldn't be a once-a-year thing, and instead can – and should – be done throughout the year, the New Year is an opportunity for people to take stock of their current financial situation. It’s a chance to look at spending from the previous year and develop an action plan that best suits individual circumstances and needs. Goal setting can make you feel more in control of your finances, Ross said.
That said, many New Year’s resolutions often don’t stick for long because they are not realistic, or there's not an action plan behind them, according to research out of the University of British Columbia. Which brings us to...
How to set – and keep – financial resolutions
Before you can set a financial resolution or goal, you need to understand your financial picture, Ross said. Start by asking: How much do you spend each month? Are you going over budget? Do you even have a budget?
There are several TD resources available to help with understanding your finances, including the TD Financial Health Assessment tool. If you haven't created a budget before, here’s a TD article on how to make one.
Once you know what money is coming in and out each month, see what portion of your spending is relatively fixed, meaning regular costs such as housing, property taxes, and insurance, that are hard to change in the short term. Then, see what portion of your budget is more discretionary, such as entertainment, dining out, and shopping, to understand what could be trimmed if necessary.
After evaluating your situation, try setting a financial goal that is meaningful to you. Your goal should follow the acronym SMART, said Ross, meaning it is specific, measurable, achievable, relevant, and time bound.
For example, do you want to save for a vacation at the end of the year? Do you have an upcoming wedding? Do you want to pay off a debt within six months?
"Once you’ve identified a goal, create an intentional plan that lays out how you propose to achieve it," Ross said.
For example, if your goal is to save $5,000 for your wedding in 12 months, you and your partner might decide you can each save $300 a month by bringing a packed lunch to work instead of buying one every day.
Or, if your goal is to put aside an extra $100 every month into your savings account, you might realize you can swap your $6 lattes for $3 drip coffees.
Ross said it’s important to be able to measure your success to see if you’re actively working towards your objective. This might mean reviewing your budget each month to see if you’re on track, or revisiting your resolution every quarter to see if it’s still feasible. If your personal circumstances change, it’s wise to check in with yourself and see if your goal(s) need to be adjusted.
And, if you’re struggling with motivation, it’s important to remind yourself what you’re working towards. Say you are working towards paying off a debt – you might want to calculate how much interest you will have saved by paying it off within six months versus a year. Or, if you’re saving for a family vacation at the end of the year, you might browse photos of the resort you plan on heading to.
The bottom line is that financial resolutions should not be something Canadians set at the start of a New Year and then forget about; they are part of having a healthy relationship with your finances and you need to check in on them on a regular basis. And if you haven’t yet set a financial goal for 2024, it’s not too late to create one – big or small.
“Making small changes, and then building on them, can go a long way,” Ross said.