Unprecedented events have affected how people save their financial resources, how they are spent and invested, and how they prioritize.
In a report published by the American site “HERMONEY”, writer Diana Yoshim said that the repercussions of the financial crisis of Corona affected people in different ways and to varying degrees, and also affected all our financial habits in one way or another, and here are the most important ways that the major economic events of 2020 changed them in How we handle our financial affairs.
Our financial priorities have changed
Because of the precarious job conditions, people are giving priority to immediate financial matters, specifically addressing late bills or paying them regularly. According to a recent survey conducted by Bankrate, 46% of households said that paying bills is their top priority now, in exchange for 38% last year.
We became more organized
According to a survey conducted by the “First National Bank of Omaha” about the effects of the financial pandemic, it was found that 72% of Americans believe that the virus has made them more financially organized than they were before.
It is natural for people to pay more attention to the details of their financial resources, given that economic events affect everything, from job stability to interest rates paid and due from loans and savings, and it is better to continue to practice this habit even after the end of the pandemic.
We cut back on spending
The latest data, released by the Bureau of Economic Analysis, shows that consumer spending fell from 8.7% in May to only 1% in August, but not all households cut spending at the same rate, and a recent Harvard research paper shows that high-income households The higher-income group has reduced their spending by 17% as of last June, and low-income families have reduced their expenditures by up to 4%.
This had severe repercussions. Because of spending cuts, companies in wealthier neighborhoods lost more than 70% of their revenues, and this led to lower-wage workers in high-rent areas losing their jobs at a higher rate than those working in low-rent areas.
We’re saving more money
The personal saving rate rose to a record high of 32.2% in April (noting that its highest rate was recorded in May 1975 at 17.3%) throughout the past decade, and the savings rate – the percentage of a person’s remaining income each month after deducting taxes and expenses – ranges Between 6 and 8%.
At the same time, high-yield savings account rates have collapsed and are now in the 1% range, yet one of the best financial habits is getting used to living with less income and saving more.
We are still continuing with the retirement plan
If you are avoiding thinking about a retirement plan, you are not alone, it was difficult to absorb the constant changes, yet most investors stuck with a long-term investing mindset, according to the Investment Corporation Institute (which looks at data from more than 30 million participating accounts) that only 2% of Americans They stopped contributing to their defined retirement plan during the first half of the year, which is close to the average of previous years.
Only 2.8% of participants withdrew money from their plan (compared to 2.5% in 2019). In contrast, 1.1% withdrew funds due to financial distress (at a similar rate last year). However, we did not diverge from the investment strategy we defined earlier, as the percentage of those who changed their asset allocation is slightly higher than in previous years.
We are becoming more aware of the choice of places to shop
The pandemic has dealt a severe blow to small businesses, and as a result, consumers are becoming more aware of where they are spending their money and have turned to local shopping. The “First National Bank of Omaha” survey indicates that 67% of respondents said they made an effort to shop from local businesses, while 38% reported that they have consciously purchased from projects run by minorities.