Financial Wellness Is Really About Financial Priorities

In the aftermath of a pandemic that lasted well over a year, the behavior and outlook of U.S. investors have changed significantly, and their views on financial wellbeing have similarly changed.

Nearly two-thirds (63%) of investors who didn’t have an emergency savings fund prior to the pandemic have or are planning to have one due to COVID-19, according to a financial priorities survey of more than 3,000 Americans published in April by Ameriprise Financial. The study shows that the COVID-19 pandemic has rewritten the way many investors spend and save their money – and they expect them to carry their newfound priorities into the future.

According to Ameriprise, a majority of respondents (63%) said their household incomes were not significantly affected by the pandemic, and 10% said their income had actually increased. However, a quarter (25%) said they made less money, with many in this group seeing significant income losses.

With this in mind, more than six in ten respondents said protecting their financial assets (63%) and planning uncertainties (62%) are more important to them today than they were before the pandemic. Almost half (45%) believe these shifts will last for a long time, whatever the case in terms of broad economic recovery.

“While the economic impact of the pandemic has hit people across the country unevenly, this has been a wake-up call for everyone,” said Marcy Keckler, vice president of financial advisory strategy at Ameriprise in Minneapolis. “The exceptional circumstances of the past year have convinced many people, including those already on solid financial footing, to take action that they may have previously postponed. Investors pay closer attention to their finances and make important changes to strengthen their financial position. “

Contradicting signals?

Related data from the 2021 Retirement Confidence Survey conducted by the Employee Benefit Research Institute (EBRI) and Greenwald Research shows that 80% of retirees are confident of being able to live comfortably during retirement. This is actually due to the 76% of retirees who have held this view over the past year.

EBRI and Greenwald find that 18% of workers reported having cut their working hours and / or their salary since February 1, 2020, while 10% had been on leave or made temporary dismissals. Overall, 39% of employees stated that their household had seen a negative change in job or income since February 1, 2020. On the other hand, 21% of employees said they saw a positive change in work over the same period.

“Even as the labor market changes, employee confidence in their ability to live comfortably in retirement remains high overall,” said Craig Copeland, senior research associate at EBRI. “While resilience may be the buzzword for 2021, three in ten workers say the pandemic has negatively affected their ability to save for retirement due to reduced working hours, income or job changes. The group most likely to have their ability to save compromised were those who historically had low levels of confidence; B. those on low incomes who are not married and have a problem with debt. “

The Ameriprise study shows that nearly half (45%) of respondents cut their spending during the pandemic and 30% expect them to be more frugal with their money in the future. At the other end of the spectrum, a quarter made large ticket purchases or, for example, invested in a major home renovation. Once the pandemic ends, a quarter of investors expect to spend more than usual on activities they have had to postpone. It is also noteworthy that 30% of survey participants who did not have a counselor before the pandemic have worked with one because of COVID-19 or will soon do so.

“A finance professional can play an important role in helping investors assess the long-term implications of their shifting priorities,” says Keckler. “The advice of a qualified professional can help you navigate the twists and turns of life and stay on track to meet your greatest financial goals for the future.”

New views after the pandemic

Data from the Northwestern Mutual “2021 Planning and Progress Study” – an annual research that examines American attitudes and behaviors about money, financial decisions, and broader economic problems – shows that one-third (32%) of Americans say that their financial discipline actually improved during the pandemic. In this group, 95% expect their newfound habits to persist after the health crisis subsides.

The study notes that the pandemic and related events have led people to be proactive in planning. Almost one in five (17%) U.S. adults aged 18 and over said they didn’t have a financial plan before the pandemic, but now they do. Overall, 83% of people were asked to create, reconsider, or adjust their financial plan during the pandemic.

“COVID-19 has caused financial setbacks for so many Americans, but people are changing their behavior and financial decisions to make them directly,” said Christian Mitchell, executive vice president and chief customer officer for Northwestern Mutual in Milwaukee. “While we don’t know what life will be like after COVID, we are encouraged to see that people intend to stick with the better financial habits they have developed during this challenging time.”

Behaviors that people say they have adopted and are likely to maintain in the future include reducing the cost of living and reducing discretionary spending (45%); Pay off debts more aggressively (34%); increasing investment level (33%); regular review of financial plans (29%); increasing use of technical / digital solutions to manage finances (28%); and increase in pension contributions (25%).

On the other hand, the Northwestern Mutual study also shows that nearly half (45%) of Americans say the pandemic has affected their timeline for achieving long-term financial security. Most say this is a year or two setback.

“Improving financial habits is certainly positive, but it shouldn’t overshadow the fact that for many it comes from a place of financial difficulty,” concludes Mitchell. “Taking action is critical, and the first step is to come up with a solid plan.”

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