Hard financial times were common during the pandemic, as Americans faced job losses, wage cuts, rising debt, and through-the-roof housing prices. But whether they scrimped and struggled or simply stayed at home and spent less, many say the experience helped them build better money habits. Nearly a third, 32%, of people in a new poll said their discipline with money improved over the last year, and 95% think that mindset will outlast the Covid shutdown.
Northwestern Mutual's 2021 Planning & Progress Study, conducted by The Harris Poll in March, surveyed over 2,300 American adults on topics like financial decision-making and money attitudes. They found that the pandemic gave many people an excuse to reprioritize their finances, rethink their budgets, and plan for the future.
Nearly 1 in 5, 17%, of poll-takers said they didn't have a financial plan before the pandemic, but they do now. A remarkable 83% of respondents were prompted to either create, revisit, or adjust their existing financial plan during Covid.
"I can't say there was a silver lining that came from the pandemic, but Americans did learn valuable lessons," says Howard Dvorkin, a certified public accountant and Debt.com chairman. "The most optimistic number I see isn't the 83% of adults who revised their financial plans; it's the 17% who created a plan for the first time. It's easy to improve your finances if you're already financially responsible. The hard part is getting people who aren't to improve."
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Poll respondents found many ways to focus on their finances during Covid. Nearly half, 45%, said "reducing living costs/spending," from dining out less to canceling subscriptions, was a pandemic behavior they adopted and expect to keep. About a third, 34%, said they had worked on paying down debt; 33% increased their investing; and 29% have committed to "regularly revisiting their financial plans."
The pandemic left its mark on many households. Almost half, 45%, of respondents said the pandemic hurt their timeline for achieving long-term financial security, setting them back at least one or two years. More than a third, 35%, said they had been forced to postpone a major life event like buying a home or looking for a new job.
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Gen Zers (born in 1997 or after, according to the Pew Research Center) and millennials (born 1981-1996) had it worst. About two-thirds of each, 63% and 65%, respectively, said that Covid had set back their financial plans by a year or more.
"Covid-19 has dealt financial setbacks to so many Americans, but people are changing their behaviors and financial choices to meet those head-on," Christian Mitchell, executive vice president and chief customer officer at Northwestern Mutual, said in a statement. "While we don't know what post-Covid life will look like, we're encouraged to see that people intend to hold on to the better financial habits they've developed during this challenging time."
To reach money milestones and feel more secure about your post-pandemic future, experts recommend creating a personal financial plan and sticking to a budget.
Making a plan helps to put your goals in focus, says Dvorkin. "Almost half of Americans want to reduce living costs, and more than a quarter want to pay off debt, invest more, and save for retirement. Those are all noble goals, but it's hard to do all of those at the same time."
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You could start by writing down your goals and the amount you'll need to put towards them, and then compare that to how much you're earning and spending each month. If the idea of itemizing all your expenses is overwhelming, start smaller by listing out the essentials, like housing, food, and transportation. Subtract those fixed costs from your monthly income, and use that as a foundation for understanding how you spend what's left over.
As you get more comfortable with the idea of following your money, you can then begin adding other important expenditures to the list.
"People don't need anything fancy to budget," Dvorkin says. "You could write down all your expenses on a napkin if that works for you. People just need to find some method to keep track of what they're making and what they're spending. Switch up your methods once in a while and see if pen and paper, an app, spreadsheets, or other tools are the best fit for you."
Anything you can do to take charge of your finances, however small, is a "positive for sure," says Mitchell. "Taking action is critical, and the first step is putting a solid plan in place."
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