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Americans’ Financial Habits Have Improved Amid Coronavirus Pandemic
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While nearly 40% of U.S. adults wouldn’t be able to cover a $400 emergency expense with cash or an equivalent, the COVID-19 pandemic has lit a fire under Americans regarding their financial habits.
According to Northwestern Mutual’s 2021 Planning & Progress Study, nearly a third (32%) of Americans feel their financial discipline has improved amid the coronavirus crisis. Of this group, the vast majority (95%) say they expect their new habits will have staying power.
How the pandemic has changed Americans’ financial outlooks
The pandemic has forced many Americans to assess their finances, including their attitudes and behaviors about money. The Northwestern Mutual survey reveals that about 1 in 5 (17%) U.S. adults didn’t have a financial plan before the pandemic but now do.
Another 66% of adults revisited their plan, with 18% making significant adjustments and 14% making minor changes. An additional 17% don’t have a plan — and won’t create one.
Meanwhile, 45% of respondents say the crisis has put a wrench in their long-term financial stability goals. Of that group:
- 15% say the crisis set them back less than a year
- 18% say they’ve been set back one to two years
- 9% say they’ve been set back three to five years
- 3% say they’ve been set back five-plus years
Of the remaining batch, 36% say the pandemic hasn’t impacted their financial goals or shortened them, while 18% don’t feel they will ever achieve this form of security.
Delays or postponements have been prominent, but they won’t impact these financial habits
Not only has the pandemic impacted Americans’ financial outlooks, but it’s delayed major financial or life events for a third of Americans. According to the survey, 17% of Americans have pushed off big-ticket purchases, with other events being delayed:
- Job hunting or job hopping: 10%
- Buying or building a home: 9%
- Starting a business: 6%
- Starting or attending college: 5%
- Getting married: 4%
- Retiring or exiting the workforce: 4%
- Having or adopting children: 3%
- Getting divorced: 2%
Despite these delays or postponements, Americans expect many of the financial habits they picked up during the pandemic will remain. This is led by scaling back on living expenses and spending — such as canceling subscriptions and eating out less — at 45%.
Other habits that Americans feel will stick after the pandemic include:
- Paying off debt: 34%
- Increasing investments: 33%
- Revisiting financial plans regularly: 29%
- Increasing the use of technology to manage finances: 28%
- Increasing retirement contribution/savings: 25%
- Increasing non-retirement savings: 24%
- Adjusting investing approach: 22%
- Getting professional financial advice: 19%
- Increasing spending: 13%
- Taking out loans or borrowing money: 8%
For those who want to save on living expenses, start with the big wins and find ways to cut back on major expenses, such as housing, food and transportation.
Next, cut back on easy wins, or expenses you might not miss or can save on over the long run. For instance, call your internet provider and see if they have any deals available or cut one of your streaming services if you already have five.
Any money you save could go toward your savings or paying off debt. To pay off debt quicker — besides lowering your living expenses and reducing your spending — develop a debt repayment plan. This could include options such as taking out a personal loan for debt consolidation.
Methodology: The Harris Poll fielded an online survey for Northwestern Mutual between March 16-26, 2021, of 2,320 U.S. adults.