COVID-19: More Than Half of Americans Are Less Confident in Their Finances Compared to Before the Pandemic

sturti / Getty Images/iStockphoto

Was 2019 the last year of the good old days? Maybe — at least when it comes to money.

According to a new GOBankingRates survey of more than 1,000 adults, more than half of Americans are less confident about their finances today than they were pre-pandemic. They’re about evenly split, with 27% feeling somewhat less secure and another 27% feeling much worse about their current money situation than before 2020.

Considering the climate, many financial experts aren’t surprised.

“Just as we saw [recently] with Silicon Valley Bank, money and finance are less stable than many of us like to admit,” said Sam Garrison, co-founder of the financial wellness app Stackin. “We’ve seen significant swings when it comes to money, with the fear of inflation and the pain of interest rates driving a turbulent understanding of the markets and economy. Though these are macro factors, they have very real impacts on consumers and how they feel about money.”

Investing for Everyone

Stimulus Was Fleeting, but Its Consequences Still Linger

According to the Brookings Institution, the three stimulus payments that kept America afloat during the pandemic went as quickly as they came for most households. While the highest-earning families banked their payments and lived off their pre-pandemic money, average- and lower-income families — and even wealthier families that suffered income loss — spent their checks immediately or close to it.

“The government spent a lot during the coronavirus pandemic to ease the economic difficulty,” said Bill Ryze, chartered financial consultant and board advisor at financial services site Fiona. “However, most Americans are not as confident in their financial situation as they were before the pandemic because the stimulus, though helpful, was not the all-time solution the citizens needed.”

Life Got More Expensive Just as the Money Ran Out

Millions of American checking accounts served as economic revolving doors — money came in, then went right back out into an economy whose supply chains could meet the new demand. It was a toxic brew that sent prices skyward just as the money ran out for most families.

Investing for Everyone

“Ironically, the stimulus plans that the government put into place to boost the economy ended up driving inflation, which is now hurting many Americans,” said Alex King, founder of Generation Money.

Most families are right back where they started — only now, everything costs more.

“People have the same financial balance as before but the world has moved with inflation that’s unprecedented in recent history,” said David Martinez de Lecea, CEO of wealth and investment tracking app Exirio.

Take Our Poll: How Much Salary Would Buy You Happiness?

The Path Back to Pre-COVID Confidence

The world has changed, but the recipe for healthy money management has not. “The way out is to get a strong grip on one’s personal finances,” said Martinez de Lecea. “Create a budget and stick to it.”

Budgeting is almost always the first step toward good financial health, but here’s some more sound advice.

Focus on the Fundamentals

The 54% who have lost their financial footing since 2020 might feel like the challenges they’re facing are enormous and complex. The good news is that the solutions are simple and basic — assess your situation, establish goals and create a spending plan to match.

Investing for Everyone

“The key to getting back on track is to understand their own financial situation and what they need,” said Garrison. “Taking the time to understand where their money is currently going and what they want to prioritize is key to them developing their confidence. Understanding their goals — and what they need to achieve them — also helps to structure action and remove some of the anxiety about what is happening more broadly, and focus on the small behaviors and actions that individuals can take.”

Confidence Starts With an Emergency Fund

No matter the size of your credit card debt, student loans or any other financial burden you’re facing, you must develop a something-is-better-than-nothing attitude toward saving. Your confidence will grow with every dollar you bank.

“They can get back on track and regain their confidence in their financial situation by having an emergency fund,” said Ryze. “Imagine the worry you have when you think something bad might happen that you cannot afford to bypass. Lack of savings can lead to stress and reduce your confidence in your financial situation, as one unexpected expense like an accident or an illness can turn your life upside down. Therefore, having an emergency fund for a rainy day can increase your confidence.”

Investing for Everyone

Revisit Your Pre-Pandemic Debt

Pre-COVID debt was much cheaper to finance. Unless you locked in a low rate for a long term before last year, your old loans are more expensive now.

“Cutting interest on your debts is one of the biggest factors in controlling your finances,” said King. “Especially as the Fed has been upping rates recently. Check your credit cards, if you have them, and try to switch to a card with a lower interest rate.”

The easiest way to buy yourself some time is by transferring your debt to a card with a 0% introductory APR. Citi Simplicity, for example, offers 21 interest-free months for balance transfers.

As Always, the Key Is To Spend Less or Earn More — Preferably Both

In the end, there are still only two paths to a life with more money — earn more or spend less.

“Do everything possible to maximize income, even if it means a new job or a second job,” said Martinez de Lecea. “Luckily the job market is still healthy — particularly for contract workers looking for a second source of income. Do everything possible to minimize expenses. Pay off debt, remove all discretionary expenses and shop around for cheaper deals.”

And remember, every little bit counts.

“High inflation is unlikely to last forever, so look at any monthly subscriptions that you’re happy to temporarily cut to boost your finances now,” said King. “When the economic situation improves, you can always sign up again.”

More From GOBankingRates