See How 2020 Changed The Way People Think About Money

by MSE Staff | Published 1 Aug 2021 (Updated 5 Nov 2021)

There’s no denying that 2020 drastically reshaped everyone’s lives. Much like The Great Depression and Great Recession, we are in the midst of a generation defining event. The pandemic has drastically reshaped how many people define financial wellbeing. It has also changed the way people handle their money. Thanks to a survey “conducted by The Harris Poll on behalf of Empower Retirement and Personal Capital from March 23, 2021 to April 5, 2021 among 2,005 respondents,” we now have more clarity on how the pandemic has reshaped our lives (1 p. 32).

Rethinking Financial Wellbeing

How do you define financial wellbeing? Would you say that it’s about making at least $75,000 per year in your career? Or, would you say that it’s about having an individual retirement account?

The Consumer Financial Protection Bureau (CFPB) spent over 60 hours interviewing people to get a solid idea of what it means to be financially well for their 2015 report. The CFPB found that to be financially well, you:

• “Have control over day-to-day, month-to-month finances;
• Have the capacity to absorb a financial shock;
• Are on track to meet your financial goals; and
• Have the financial freedom to make the choices that allow you to enjoy life” (2 p. 5).

While these four parts express it well, Personal Capital’s 2021 report shows that the meaning of financial wellbeing changes. The meaning of financial wellbeing changes for each of us depending on life events and our life stages.

Americans today define financial health based on “the links between financial matters and other parts of life” (1 p. 7). That’s a groundbreaking discovery! Americans see financial wellbeing as having holistic financial stability in pursuit of a better quality of life. This is a big departure from viewing financial wellbeing as a monetary milestone. The pandemic has brought life-domains to the forefront of financial wellness.

How does your financial state impact your different areas of life? We know that answer changes depending on your life events and life stage. And, the meaning of financial stability is different for you when you’re 20 years old with no dependents than it is when you’re 50 years old with dependents. The importance of our life domains wax and wane throughout our lives. For example, establishing a career is more important to someone who’s younger than someone who’s getting ready to retire. This report really highlights how people are more aware of financial wellness than many experts have given credit for.

Barriers to Financial Wellbeing

Pull anyone aside and ask them what areas of life are most important to them and they will tell you. However, financial stability and these life domains can have complimentary and detrimental interactions between one another. A lack of financial stability is a detrimental interaction flowing out of your finances and into different aspects of your life. A great example of this is having your hours cut at work and not having money set aside to weather the storm. The reduction in income is sure to impact your non-essential spending first. That may manifest as switching to cheaper food, making adjustments to family outings, or carpooling, etc. Financial stability plays a major role in our financial wellbeing.

The most prevalent barriers to financial wellbeing were not getting paid enough, expenses piling on, and an inability to save (1 p. 24). The math is easy to get behind. When you have more money going out than coming in, you have poor cash flow. An inability to resolve this challenge only causes more pain points like not being able to save and sinking deeper into debt. These are hallmark symptoms of financial instability. Let’s look at how people are adapting.

How The Pandemic Changed Money Habits

Many people reported cutting back on non-essential items, focusing on saving, and thinking about financial planning more often. Much like the Great Depression, many people are becoming more frugal in response to the economic turmoil. Financial stability has become a very attractive lifestyle choice among Gen Z, Millennials, and Gen X. Stability and financial security are more important now than ever (1 p. 13).

However, a closer look reveals that Americans perceived financial literacy as the least important factor to good financial health. The two most important factors Americans perceived for good financial health were having enough to pay their bills and having enough money in their accounts (1 p. 17). It’s important to point out that there is a positive correlation between being financially literate and having financial stability. This is because people who are financially literate are able to demonstrate the capability to make sound financial decisions.

Financial Education & Wealth Mentoring

Financial Education is an important step in developing behaviors that produce financial stability and ultimately your financial wellbeing. This is why those who are financially literate have much better odds of recovering from a financial setback. Achieving financial stability and financial wellbeing gets even easier to achieve when you have a mentor in your corner. Boost your financial growth with expert support at your fingertips.

I offer unique programs and systems for building wealth. Speak to a real person that’s attentive to your needs in the classroom. With Zoom-based sessions, I can answer your questions in the class. Realize your own system for building wealth with Money Smart tools to guide you. Demonstrating your financial capability becomes much easier when you have the right tools and guidance. Plus you can take on your biggest financial goals with a private mentor at your side.

References

1. Personal Capital, an Empower Company. The Journey Toward Financial Freedom: How Americans define financial wellbeing, how they get there and what stands in their way. s.l. : Empower Retirement, 2021.

2. CFPB. Financial Well-being: The Goal of Financial Education. s.l. : Consumer Financial Protection Bureau, 2015.