A Tale of Two American Consumers

The New Coronavirus Stimulus Package
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It is not breaking news that for many people 2020 was tough. From financial health, to mental health. From social justice to a pandemic, and a subsequent economic recession. For many of us, we experienced a lifetime of challenges within a single year.

As we turn the calendar over to 2021, for many people significant challenges remain as the health of the nation and individual Americans is at crossroads. As we do every January we conducted a survey to examine how people are feeling about their finances, their debt and the economy at large. While some of the results were expected, others were shocking in a variety of ways. The survey results on the whole speak to a nation that is divided and subdivided further by gender, by age, and employment status.

Nearly 7 in 10 (69%) Americans say they had their finances impacted by COVID-19 and the recession. But at the same time 76% of Americans say they feel good or very good about their current financial security.

More than a third of people (34%) say they feel  worse off financially compared to a year ago – in our 2020 survey where we asked that same question, the number was 27%.

  • 40% of respondents say that they or someone in their household has experienced worsening health conditions as a result of avoiding healthcare settings and/or doctor’s offices. An astounding, 80% of these individuals report that this decision led them to ultimately incur more expensive medical bills or see a significant increase to the costs of their healthcare.
  • Even though personal saving rates are near an all-time high, 73% somewhat or strongly agree that an unexpected $500 expense or bill would be problematic. In last year’s survey, 68% said the same.

Optimistic Outlook

On the whole, most people are feeling optimistic about their finances, with 70% saying they are confident in their personal financial outlook. As mentioned earlier, more than three-quarters (76%) say they feel good or very good about their current financial security. That is up 24 percentage points from a survey we conducted last October.

As we begin to recover from both the pandemic and the recession, the majority of Americans anticipate their financial habits to change, too – including a significant number who will be looking for ways to supplement their income.

  • 12% say they will seriously consider sharing housing and associated costs with family or close friends.
  • 28% say they will look for additional sources of income.

Furthermore, many people expect to limit their spending in key areas in order to manage household finances better.

  • 75% say they anticipate spending about the same or less on dining out.
  • 75% say they plan on spending about the same or less on retail expenses.

Lots of Saving, Little Stimulating

The recent round of $600 stimulus checks were intended to help fuel the economy through consumer spending and discretionary spending. But many Americans who qualified for the second round of stimulus checks are using – or plan to use – the money for savings, to pay down debt or to handle everyday expenses.

  • Those who have received their stimulus checks say they have used the money on:
    • Savings: 38%
    • Debt payoff: 32%
    • Everyday expenses (e.g., groceries, gas, coffee, etc.): 31%
    • Discretionary spending: 27%

Debt Worries: Credit card, Medical

More than half of consumers (56%) feel overwhelmed with their debt and financial situation.

More than 4 in 10 (43%) of respondents say they are carrying credit card debt. Half of them say they have more than they had a year ago – and are anxious to eliminate it. In fact, 79% are confident they will pay off their credit card debt this year. That’s up from 70% who expressed confidence they would pay off their debt in 2020. Finally, 53% say they have elected to only pay the minimum balances on their credit card bills two or more times since the beginning of the COVID-19 recession.

On the healthcare front, we are seeing substantial challenges for everyday Americans. Overall, 20% of people say they have medical debt, with three-quarters of them reporting that they have accumulated more medical debt since the beginning of the pandemic in the United States in March 2020.

Of these individuals who have accumulated more medical debt since last March, 60% have done so because they, or someone in their household, experienced increased doctor’s visits due to potential COVID-19 exposures. In addition, more than a third (36%) of these individuals who’ve experienced more medical debt since last March have done so because they, or someone in their household, contracted COVID-19. More than a quarter (26%) have incurred additional out-of-pocket medical expenses because they or the head of their household lost health insurance coverage.

It bears repeating that 40% of respondents say that they or someone in their household has experienced worsening health conditions as a result of avoiding healthcare settings and/or doctor’s offices – and that an astounding 80% of these individuals report that this decision led them to ultimately incur more expensive medical bills or see a significant increase in the costs of their healthcare.

Tax Refund Use, Need

One of the key cash events for Americans is their tax refund. In fact, for many people, it is the largest cash transaction they will experience every year. With the recent news that the opening of the tax season will be delayed by roughly three weeks, we asked a series of questions on what the impact of the delay would have on households.

While the planned uses for the refund are not surprising, what is notable is that 1 in 5 Americans (21%) report that it would be difficult to buy groceries and household goods that they or members of their household need if they received their tax refund just two or three weeks later than usual. The same number said that a similar delay would lead them to accumulate more credit card debt.

Gender Differences

It is important note the disparity and significant differences in how men and women responded across our survey this year.

  • Impact of COVID-19 on finances: More men (76%) than women (62%) say that COVID-19 has impacted their current financial situation moderately or highly.
  • Financial security: 86% of men say they feel good or very good about their current financial security, while just 66% of women do. Furthermore, 34% of women feel poor or very poor about their financial security.
  • Debt: Despite the above finding, 64% of men say they feel overwhelmed with their debt and financial situation. Only 48% of women do. 
  • Financially better or worse off than a year ago: 40% of women say they feel financially worse off compared to a year ago. In our survey conducted last January, just 30% of women said they felt financially worse off compared to the previous year.
  • Stimulus money spending: Forty-one percent of men who have received their money say they have spent it on themselves (discretionary spending), while only 13% of women have.

Use of COVID-19 Pandemic Relief Measures:

Household Income Splits

Our survey also notes some key differences in behaviors among lower- and higher-income households.

  • Feeling worse off: Almost half (47%) of American households with an annual income of less than $50,000 say they feel worse off financially compared to a year ago. Just 19% with annual incomes of $100,000 or more report feeling the same way.
  • Dealing with credit card debt: Higher-income households more often (61%) say they have elected to pay the minimum amount owed on their credit card bills two or more times since the beginning of the COVID-19 recession. Just 47% of lower-income households have.

Conclusion

The pandemic and recession clearly continue to wear on Americans’ finances. While people are showing signs of optimism that their situation will improve this year, lingering credit card debt and rising medical debt and healthcare costs are concerning. And even as saving rates remain high, the fact that almost three-quarters of American would find an unexpected $500 expense or bill problematic is worrisome.

Finally, what we really are seeing in the results is the tale of two consumers. One type of consumer has been disproportionately impacted by the pandemic, recession and unemployment. The other is optimistic, has cash on hand and is looking forward to getting back to “normal”. It is important to note that as lawmakers consider an additional stimulus in Washington, the focus should be on the first to ensure that these individuals have the necessary tools and support to ride out the final stages of the pandemic and recession.

Methodology: Freedom Financial Network commissioned Atomik Research to conduct an online survey of 2,005 adults in the United States Jan. 20-22, 2021. The margin of error is +/- 2%t, with a confidence interval of 95%. Atomik Research is an independent creative market research agency. Download the raw data here

Michael Micheletti serves as the Director of Corporate Communications at Freedom Financial Network where he is responsible for the strategic communications planning, knowledge dissemination and outreach to key consumer audiences. Before joining Freedom he held a variety of high profile communication and consumer education roles focusing on healthcare, tax and housing. He is a former reporter for FOX News, CNN and served as news director for Clear Channel Radio San Francisco.