A September 9th poll by DollarSprout shows that Americans are contributing less to their 401(k), spending more money on unhealthy habits, and they regret not cutting expenses sooner in the pandemic.
What It All Means
The classic “3-6 month emergency fund” advice that is passed around isn’t enough anymore. Income diversification is just as important.
It’s been over 6 months since the COVID-19 pandemic was declared in the United States. For many that have taken even the most aggressive approach to saving a long-term emergency fund, it likely won’t be enough to stave off liquidity issues. While it’s not entirely realistic to expect most people to save a year’s worth of expenses (or more) for a rainy day — on top of saving for retirement — the pandemic has shown that many people need to have a backup plan for earning income. In addition to an emergency fund, people need to develop emergency income streams that they can tap into during difficult times.
Even the most money-savvy people are struggling this year. No one is alone.
It’s not just the paycheck-to-paycheck, overspending crowd that’s in trouble. Nearly one in five people who did not carry credit card debt in 2019 now have a recurring credit card balance. These are people that know how harmful this type of high-interest debt is, yet couldn’t avoid it this year. To be fair, credit card companies often get a bad rap, but they have been a lifeline to millions of Americans this year.
The priority is making it through the pandemic — at the expense of our long term future.
Between delaying major financial decisions, cutting back retirement contributions, and even increasing “sin” spending as a coping mechanism, it’s clear that the main priority for many is to simply make it through the pandemic. 74% of people support increasing the national debt to fund an additional stimulus package, which suggests a rare bipartisan agreement that we need to do whatever we can to make it through our current situation.