The COVID-19 pandemic has fundamentally changed the way Americans plan their finances and savings, with many turning to short-term rather than long-term goals, according to a new survey from New York Life.
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Nearly half of respondents (46%) in New York Life Wealth Watch’s latest 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 short-term priorities like building a fund emergency (38%), paying off credit card debt (31%), financing a vacation (27%) or buying a car (25%).
“Over the past year and counting, Americans have had to be nimble when it comes to their short- and long-term financial priorities,” said Aaron Ball, head of insurance solutions, services and marketing for the New York Life, to GOBankingRates in an email. . “While Americans still understand the importance of a long-term financial strategy, our data revealed that the current COVID environment has shifted the focus to short-term goals.”
The survey, conducted in December 2021 and released on January 25, interviewed around 2,200 adults. Much of the focus has been on Americans’ confidence in their financial situation and savings strategies. On this point, there is still a lot of uncertainty. Less than 40% of respondents said they felt “hopeful” as the New Year approached. Only one in four (25%) said they felt ‘on track towards a goal/lifestyle’ and 28% said they felt ‘unsure’.
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Those who feel the most confident about achieving their financial goals said they have savings (46%), have a strategy in place (42%) and are successful in managing their debt (37%).
The level of confidence varies by age group. Gen Xers — the next group to retire, after baby boomers — tend to report lower levels of confidence in their savings and retirement strategies, the survey found. More than half (53%) of Gen Xers said they felt less prepared than their peers. This could be due to 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 are still unsure if they have the right financial plan. Only 30% said they have a financial strategy in place and are confident in that strategy. Millennials and Gen Z have said they want to develop financial strategies. Regardless of age group, most respondents are still unsure if they have the right financial plan. Only 30% said they have a financial strategy in place and are confident in that strategy. Millennials and Gen Z have said they want to develop financial strategies, including hiring finance professionals, to help alleviate financial stress and anxiety.
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Respondents who said they did not 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%), the absence of a strategy in place (32%) and debt management problems (29%).
One way to address these issues 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 cannot adapt to life’s changes. It’s essential to reassess your financial strategy on an ongoing basis, and the new year is the perfect time for many to do so.
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