The COVID-19 pandemic has fundamentally changed the way Americans plan their finances and savings, with many shifting to short-term rather than long-term goals, according to a new survey from New York Life.
Nearly half of respondents (46%) in the latest New York Life Wealth Watch survey said the COVID-19 pandemic is now a factor when considering their financial strategies. A growing percentage have moved away from the traditional “holistic” financial approach — incorporating both long- and short-term goals — to one that focuses on near-term priorities like building an emergency fund (38%), paying off credit card debt (31%), funding a vacation (27%) or buying a car (25%).
“Over the last year-plus, Americans have had to be nimble when it comes to their financial priorities both short- and longer-term,” Aaron Ball, New York Life’s head of Insurance Solutions, Service and Marketing, told GOBankingRates in an email. “While Americans still understand the importance of a long-term financial strategy, our data found that the ongoing COVID environment has shifted the emphasis to short-term oriented goals.”
The survey, conducted in December 2021 and released on Jan. 25, polled about 2,200 adults. Much of the emphasis was on how confident Americans are in their financial situations and savings strategies. On that score, there’s still a lot of uncertainty. Less than 40% of respondents reported feeling “hopeful” heading into the new year. Only one in four (25%) reported feeling “on track towards a goal/lifestyle,” and 28% said they feel “uncertain.”
Those who feel the most confident about meeting their financial goals reported having savings (46%), having a strategy in place (42%) and having success in managing debt (37%).
The confidence level varies by age group. Gen Xers — the next group to retire, following boomers — tended to report lower levels of confidence in their retirement savings and strategies, the survey found. More than half (53%) of Gen Xers said they feel less prepared than their peers. This might be because of rising inflation, as nearly two-thirds (64%) of Gen Xers expect their living expenses to be higher in 2022.
Regardless of age group, most respondents still are unsure about whether they have the right financial plan. Only 30% said that they have a financial strategy in place and are confident in that strategy. Millennials and Gen Zers said they want to build out financial strategies, Regardless of age group, most respondents still are unsure about whether they have the right financial plan. Only 30% said that they have a financial strategy in place and are confident in that strategy. Millennials and Gen Zers said they want to build out financial strategies, including hiring financial professionals, to help alleviate financial stress and anxiety.
Respondents who said they don’t feel confident in achieving their overall financial goals, such as building a secure retirement fund, mostly attributed it to a lack of emergency savings (35%), not having a strategy in place (32%) and problems managing debt (29%).
One way to fix those problems is to develop flexible strategies to deal with unforeseen events, Ball said. “The risk of approaching finances with a ‘set it and forget it’ mindset is that a static financial strategy can’t adapt to life changes. It’s essential to re-evaluate your financial strategy on an ongoing basis, and the new year is an ideal time for many to do so.”
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