Despite the massive upheaval of the coronavirus pandemic, Americans' assessment of their future financial security has held steady over the past year, according to Financial Planning’s most recent Financial Wellness Report.
However, many of the 438 respondents in the most recent survey describe various economic hardships they have endured throughout the past year, including job losses, reductions in hours, struggling with debt and health expenses and even losing their homes.
And yet, multiple respondents express a cautious optimism that things will improve in 2021.
"During the start of the pandemic, I lost my job," one respondent says. "I had to move back in with family in a different state. I regained a job I had previously had and then was fired because I tested positive for COVID-19. Finances because of all of this have been extremely difficult. I am trying to be positive that 2021 will be better."
Respondents cite an array of reasons for feeling modestly hopeful about their financial position this year, with many pointing to the end of a bruising political season and the rollout of COVID vaccines. Some add to that mix a sense that things bottomed out in 2020, hoping there's nowhere to go but up in 2021.
"It can't get worse, and with a vaccine the economy should be reopening sooner rather than later," one respondent says.
Respondents to the wellness survey were asked to rate their sense of financial security on a scale of zero — not at all financially secure — to 10. Thirty percent report scores in the range of zero to four. Thirty-nine percent rate themselves in the range of five to seven — moderately secure. The remaining 31% rate their security in the range of eight to 10.
Those figures roughly tracked with Financial Planning's two previous consumer polls, taken in
But beneath that widely held sense of at least moderate financial security, many survey respondents report feeling a deep and rising anxiety over their ability to meet their financial obligations. Fifty-nine percent of respondents, for instance, say that they are extremely or very concerned about losing their home, with another 12% professing to be somewhat concerned. By contrast, just 23% expressed the same level of concern about losing a home in the June 2020 survey.
Many respondents also express concern about debt as a drag on their financial wellness. Forty-three percent of respondents say they are extremely or very concerned about their ability to keep up with their debt, with another 22% saying they are somewhat concerned.
"I am not very confident because it seems like I will never get caught up with my debts," one respondent says. "When I finally feel like I am making progress, something else comes up and I must put my progress on hold."
For many of those polled, the challenge of paying down or even keeping up with debt has been compounded by the loss of a job or a reduction in hours in what remains a tough economic environment for many businesses amid the pandemic.
"I barely have any work coming in and my credit cards are maxed out," one respondent says.
On a more hopeful note, numerous respondents say 2020 has made them think differently about their financial priorities, describing plans to spend less on nonessential items, and to focus more on saving.
"We are staying home more and trying to purchase only what we need — not using credit cards or dip into saving," one respondent says.
When asked about their spending plans for major purchases such as a home, car or home renovation, substantial majorities indicated that they don't intend to take on those expenditures in the next year.
"I have been learning about how to budget my money wisely," one respondent says, capturing the sentiment expressed by many others.
The extent to which more frugal spending habits translates into greater savings rates varies among respondents, but many say that the infusion of cash they received — or expect to receive — from the government in the form of stimulus payments will be used for immediate expenses or paying down debt, with fewer consumers saying they plan to put the money toward retirement or discretionary purchases.
The survey highlights some of the retirement challenges that consumers face in 2021. Many respondents report that they either don't have access to a retirement plan through their employer, or they don't contribute to it. In Financial Planning's
Asked about their priorities for 2021, many more respondents cite building up their cash reserves than saving for retirement. Just 20% of respondents say they plan to contribute the maximum to their 401(k) this year.
One respondent intends to "contribute more to [my] 401(k), but not the maximum." Another describes plans to put away "whatever I can" for retirement.
Others express a certain fatalism about their financial situation, like this middle-aged male respondent:
"I mean, I know I can survive," he says, "but I'll never be able to buy a house or expand my wealth significantly."
