By Ruth Mahoney
For many Americans, 2020 was a challenging year, as people of all creeds-families large and small; younger generations and seniors; essential and non-essential workers-adapted to changes brought forth by the COVID-19 pandemic and the resulting economic downturn.
In KeyBank’s 2021 Financial Resilience Survey, we polled more than 1,200 American between the ages of 18 to 70 to find out how they handled their personal finances over the past year. Without surprise, people found ways to be financially resilient. In fact, more than half (53%) of survey respondents reported they were more financially confident as they approached the end of 2020, compared to the beginning of the year.
Confidence, awareness and savings are up
With the economic woes of 2020 came lessons learned, highlighting Americans’ commitment to their financial fortitude, even during tough times.
While just 16% of people considered themselves to be a financial expert in 2020, 49% reported they are more financially aware as a result of challenges they might have faced during the pandemic. Some have lost jobs and income. Some have lost family members. Many have faced threats to their financial, physical and mental health. This reality led to a change in attitude about spending and savings. More than three-quarters of those surveyed say they are playing it safe when it comes to their finances, with a majority saying they are spending less on discretionary items.
Another positive trend is the growth of emergency savings. People are better prepared to handle a financial emergency at the start of 2021 than they were in 2020. More than half (51%) responded yes when asked, “Are you confident you could come up with $2,000 in the next month if an unexpected need arose?”
Impulse spending is down, optimism remains
As Americans adjusted their spending and savings to remain financially resilient during the pandemic, they made fewer financial “faux pas”-aka, money missteps-than the year prior.
Impulse spending ranked as the number one faux pas both in 2019 and 2020. The good news: 5% fewer survey respondents said they made impulse purchases during the course of the year. More good news is that few (11%) consumers put a clamp on spending. Instead, most consumers are cautiously optimistic about their finances. They are spending less and avoiding big ticket items, just in case, but they are still spending, which is great for the economy and vital for the survival of businesses struggling through the pandemic.
Boost your financial resilience
We also learned that those who feel most secure with their finances have common values about maintaining perspective and staying tough. Here are the top 3 factors those surveyed credit for helping them grow resilience.
1. Sleep. Taking care of our bodies and minds has a strong correlation to our ability to weather the financial storm and make smart money decisions during the COVID-19 pandemic. Why? Focusing on what we can control -such as sleep, physical activity, and general mindfulness-helps establish the clarity and strength necessary for dealing with many of the circumstances we cannot control.
2. Knowledge. Financial information can be sourced from many places: a financial advisor, family member, friend or the internet. The older age cohort tends to rely on financial information more than any other group, proving that no matter how many economic downturns you have experienced, it is still beneficial to keep learning. Talking through financial decisions big or small can help you make smarter money moves. The point is: you don’t have to go it alone.
3. Access. The pandemic has accelerated the adoption of digital banking, and consumers are more comfortable with virtual money management than ever before. People are leaning on budgeting apps, online banking and mobile deposits to help them navigate their financial futures and stay on track. Interestingly, those under 35, who are more likely to be experiencing financial firsts, tend to prefer a combination of digital and in-person banking, as compared to older people who are more likely to want to exclusively use digital tools for certain types of transactions.
Tackle challenges head on
Without doubt, some individuals and families are struggling through the pandemic more than others. Last year brought more adversity than most of us have experienced in decades. So if things are hard for you, you’re not alone. Talk with your banker. There are consumer and business relief programs available that can help you if you are experiencing financial hardship. All you need to do is ask. Your banker wants to help you.
Tips to navigate financial stress
There are generally two camps when it comes to feeling financially stressed of late. You’re experiencing financial hardship due to the COVID-19 pandemic or you have at least some worry the COVID-19 pandemic will impact your financial situation. Either way, having a plan can help ease the uncertainties fueling your anxiety and stress. The following three tips can help:
1. Examine, identify and plan. Take stock of your income and spending habits. Make note of where and when money causes you stress and why. Timing of paychecks and bills can make you wince, for instance, if you have several utility payments due in a short span. Also, set up a budget and prioritize how you will spend and save. Focus on the basics of food, shelter and utilities. Finally, be fully aware of any benefits you may be due. This includes paid work leave, sick leave, disability or unemployment payments. Additionally, pay attention to relief being offered through payment exceptions, postponements or other compensation during this time.
2. Declutter, reduce and pay off. Conduct regular check-ins and a thorough review of your bills and other expenses. Categorize them to ensure you’ve got a good understanding of the money that’s coming in and going out of your household accounts. Where possible, automate payments. Also look for ways to reduce spending and pay off debt. Advanced meal planning and cancelling or suspending unneeded or unused subscriptions can free up money and help you pay down existing credit obligations.
3. Stay present and take care of yourself. Don’t overlook your mental, physical and emotional health. Exercise, make a daily schedule and allow yourself relaxation and leisure time. Financially, try to rebuild your emergency funds. Even doing this a few dollars at a time makes a difference. You can automate the process by directing a portion of any regular direct deposits like paychecks into a savings account, and then adjusting it based on your goals and achievements. You can also automate a monthly transfer from checking into savings. When you receive unexpected funds or other income, look at how much you can put into savings once your basic needs are met.
These tips can be summed up in a philosophy of daily awareness and open communication. Stay focused on your goals of specific savings amounts or debt payoffs, keep yourself honest and track your progress.
Ruth Mahoney is president of KeyBank’s Capital Region. She may be reached at either 518-257-8619. KeyBank is Member FDIC © 2020. KeyCorp.