A new survey from The Balance shows that half of Americans have less than $250 left each month after accounting for necessary expenses and regular spending. The survey also revealed that 12% have nothing at all.
The Survey
The Balance conducted a survey of 1,000 adults in the U.S. who manage their personal finances and have at least one financial account – such as checking, credit, or savings accounts – in their name. Participants responded to the survey from February 8 to 12, 2021, answering questions about how their personal financial situations were affected during the COVID-19 pandemic.
Many People Were Affected While Others Thrived
Survey participants noted a divide regarding the pandemic’s impact on their financial situations: 30% of Americans say the pandemic has worsened their financial situation, while 30% say it has improved their finances, indicating an uneven recovery of the economy for individuals or groups at different times and rates.
This situation is also reflected in the amount of money Americans are spending, with 29% of survey participants saying they are currently spending more than they did before the pandemic, while 29% say they are spending less than they did before.
Overall, 56% of Americans say the pandemic has made them more aware of how much money they are spending. The vast majority (86%) say they maintain some form of budget for their income, with one-third starting to set up that budget during the pandemic. Meanwhile, 41% of Americans say the pandemic has made them more cautious about handling their money.
Budgets Have Very Little Flexibility
Most Americans say they have some discretionary income each month, but not much: 50% say that amount is less than $250.
On average, Americans spend 58% of their income on necessities, including rent and food, while setting aside 20% for discretionary spending on things like clothing and electronics. Among those who invest and save, 10% of their monthly income goes to savings, while 5% is allocated for investments.
Although most Americans maintain a budget, many occasionally overspend. 70% of survey participants say they overspend less than once a month, while 19% say they never spend more than they can or should.
When Americans do overspend, many tend to feel guilty afterward. The feeling of guilt is more pronounced among those whose financial situations worsened during the pandemic (47%) compared to those whose situations improved (29%). At the same time, Americans who experienced improved finances during the pandemic feel equally as happy (28%) about overspending as they feel guilty, according to the survey.
“It’s important to address those feelings of guilt,” according to Amy Morin, editor-in-chief of Verywell Mind and a licensed clinical social worker. “Trying to escape from them may lead to even more unhealthy behaviors.”
Increase in Saving and Investing
Nearly one-third of Americans (32%) say they are saving more than they were before the pandemic, while one-fifth say they are investing more. Americans who say they are experiencing better circumstances during the pandemic are more likely to now invest more (44%).
The most common thing Americans are saving for is an emergency fund. Among those who save, 44% of survey participants do so for rainy days. Those whose situations worsened during the year are more likely to save for emergencies (51%) compared to those whose financial situations improved (38%).
Goals
The most common reasons for Americans to save include: emergencies (44%), retirement (33%), travel (31%), and debt repayment (30%).
Debt on the Rise
About one-third of survey respondents (29%) say they have accrued new credit card debt since the pandemic began. Meanwhile, 12% have incurred new medical debt and 11% have taken on a new mortgage.
Those who fared better during the pandemic were more likely to have acquired a new mortgage (18%) compared to those whose situations worsened (7%), indicating an uneven economic recovery in the housing market.
Increased Use of Credit Cards
Among those with credit cards, 40% say they are using their credit cards more frequently during the pandemic compared to other payment methods. The top reasons for increased credit card use include making most purchases online (48%), looking for reward points (42%), and avoiding handling cash (42%).
At the same time, 68% of participants with rewards cards used their points during the pandemic. The most common uses (43%) are for cash back, although a quarter of them convert points into gift cards and 16% redeem them for clothing/accessories.
Those who do not spend their reward points are more likely to be saving them for use after the pandemic, with 16% doing so for spending after the pandemic. Other reasons include waiting until they can travel again (10%) and not being able to redeem the points for anything they want (5%).
Survey Methodology
This survey was conducted from February 8 to 12, 2021. Participants (U.S. adults aged 18 and over) represent the U.S. population in terms of age, gender, race/ethnicity, and region, and they manage their personal finances, holding at least one account in their name (checking, credit, savings, retirement, investment, or digital currency accounts).
Age: Generation Z 11% | Millennial 16% | Generation X 25% | Boomer 28% | Silent 8% Gender: Male 49% | Female 51% | 0% Non-binary/self-described Region: Midwest 21% | Northeast 17% | South 38% | West 23% Race/Ethnicity: White 60% | Black 12% | Asian 8% | Latino 18% | Mixed race/self-described 5% Annual Income: Less than $25,000 23% | $25,000 – $50,000 27% | $50,000 – $75,000 16% | $75,000 – $100,000 13% | More than $100,000 – $200,000 17% Location: Urban 32% | Suburban 45% | Rural 22%
Research by Amanda Morelli
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Source: https://www.thebalancemoney.com/half-of-americans-dont-have-usd250-to-spare-5120766
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