An expert discusses ways to take financial control, even in these uncertain times.
Stephanie Walden| for COUNTRY Financial
The COVID-19 pandemic has sent many Americans on a roller-coaster ride of uncertainty. In the past few months, the fluctuating economic predictions and a volatile employment landscape have created significant financial stressors.
To put some numbers behind this precariousness — and develop guidelines for regaining stability — COUNTRY Financial, an insurance and financial services company, and Ipsos, an independent research organization, hosted an online survey of 1,030 U.S. adults. The 2020 COUNTRY Financial Security Index is this anomalous year’s iteration of an ongoing effort. The company has been collecting data to measure Americans’ sentiments about their personal financial security since 2007.
“The Index delves deeper into individual personal finance topics to better inform Americans about the issues impacting their finances,” said Troy Frerichs, vice president of investment services at COUNTRY Financial. “The COVID-19 pandemic has affected Americans’ finances in a number of ways, and it was important for us to learn more about all of those factors so we can help educate and guide our communities.”
The survey, conducted in early April on an online platform called KnowledgePanel, found that Americans’ confidence about their financial security remains mixed. Notably, it indicated that groups who were financially vulnerable before the onset of the pandemic are now feeling a disproportionate burden.
“There are two different stories when it comes to a client’s financial situation,” Frerichs said. “For some Americans,” he said, “the situation is more or less business as usual: While they may be experiencing hurdles learning how to work from home, their incomes have not drastically changed, they’re doing roughly the same type and amount of work, and their expenses may even have gone down as they forgo the daily commute and avoid traditional entertainment venues. On the other hand, many of those surveyed are in desperate need of help. They’ve been laid off, their businesses have shut down, or they’re struggling to stay afloat financially.”
Although around 49% of respondents reported having a faltering sense of financial security since the pandemic began, there are steps Americans can take to bolster their savings and buckle in as they ride out the bumpy next few months.
“While so much remains uncertain, Americans still have the power to take the following steps to improve their finances during this time,” Frerichs said.
Here are five of his suggestions for finding stable ground during economic unpredictability.
1. Focus on factors within your control
The COUNTRY Financial Security Index found that Americans have mixed opinions about when and how long it will take the economy to rebound. About 44% of respondents said they believe it will recover within a year or two. On the more extreme ends of the spectrum, respondents were evenly split: 11% said they think the economy will stabilize in less than a year, and another 11% said they estimate it will take five or more years.
With so much up in the air, it’s difficult to locate a clear horizon line. This is why it’s particularly important for those in challenging financial straits to focus on the elements that are within their control, like daily spending habits.
“We don’t have control over a lot of things that impact our financial security, like the economy, financial markets, politics — and global pandemics,” Frerichs said. “So, what do we have control over? How much we spend and how much we save.”
2. Develop a budget
In the Index, about half of Americans reported feeling financial repercussions of the COVID-19 pandemic; younger respondents reported a greater impact, with just 42% of people ages 18 to 34 viewing their financial situation in a positive light.
Outlining projected income, expenditures and savings is a sound way to assess financial health, create spending boundaries and reestablish a sense of control. And while developing a budget may not seem like the most revolutionary financial tactic, there’s a reason it’s a core tenet of just about every short- and long-term savings plan: It works. For Americans who have been kicking the budgeting can down the road, now is the time to take a long, hard look at the numbers.
“The pandemic is forcing many Americans to make hard choices — particularly cutting expenses — so it’s more important than ever to use this time to establish a budget and commit to living within your means,” Frerichs said.
3. Create an emergency fund — even in the middle of an emergency
Even before COVID-19 was a household name, many Americans struggled to build up an emergency fund. Now, for some, the need for such a foundation is painfully clear. A full third – 33% – of respondents said they do not feel prepared to deal with the financial impact of the pandemic.
“If our current financial situation gets worse before it gets better, Americans need to have money set aside that they can lean back on as a last resort,” Frerichs said. “If you don’t currently have an emergency fund, try to set aside as much as you can every month, and aim to build enough to cover between three and six months of living expenses.”
To do this, Frerichs suggested breaking down big goals into smaller, more manageable ones. This might be a simple matter of reframing objectives. For example, saving $150 a month may seem unattainable, but putting aside $5 per day might be more comprehensible.
“Start small, and gradually increase savings over time,” Frerichs said.
4. Seek out areas of opportunity
The economic landscape isn’t all bleak. A few silver linings have emerged as a result of the crisis.
“The pandemic has led to lower interest rates, which may provide a great opportunity for some to get closer to their financial goals, such as paying off debt or lowering a mortgage payment,” Frerichs said.
“Connecting with a financial representative or lender to explore the spectrum of available options can help you make an informed decision about which of these avenues and interest rates to pursue. But be sure to consider all angles before making a major financial decision, continued Frerichs. “Read the fine print, and factor in any costs associated with an opportunity.”
5. Don’t lose sight of the long term
For those struggling to manage everyday expenses, now may not seem like the ideal moment to consider far-off goals like retirement. According to the survey, about 45% of Americans said they’re prioritizing having enough money for day-to-day expenses, and 61% of respondents said COVID-19 has negatively affected their ability to put aside money for savings or investments.
Still, saving for retirement is just as critical now as it was prior to the pandemic. The survey found that many Americans are still chugging along toward meeting their retirement goals, a finding that Frerichs called “pleasantly surprising.”
“Sometimes, when panicked, we can hurt ourselves for the long run,” he said. “But many Americans have actually kept their retirement plan contributions going versus pausing them or decreasing them.”
Thinking about retirement — yes, even now — is a prudent move. While only about half of the survey respondents said they feel on track to enjoy a comfortable retirement, those who take an active interest in their financial health are much more optimistic about the future. In fact, seven in 10 people who work with a financial planner feel they’ll very likely have enough money to enjoy a comfortable retirement.
If you don’t currently have a financial professional to turn to for guidance, now may be the time to find one. These experts can help you identify opportunities, outline short- and long-term financial objectives, and establish the discipline to meet those goals.
“As we move out of a locked-down U.S., now is a great time to reach out to a financial representative for help in assessing your current financial health so you can start feeling confident about your future,” Frerichs said.
Read the entire COUNTRY Financial Security Index here, and visit COUNTRY Financial on Twitter at @hellocountry, on Facebook at facebook.com/countryfinancial, and on Instagram at @countryfinancial.
Members of the editorial and news staff of USA TODAY Network were not involved in the creation of this content.
