COVID-19 Pandemic Strikes at American’s Financial Health

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Update: April 30, 2020

In a pulse survey of 505 respondents we conducted April 22, we found some significant changes in the effects of the COVID-19 pandemic on consumers’ financial status, and in their concerns for the upcoming months.

Top Findings:

90% of respondents say their financial situation has been impacted by the COVID-19 pandemic to some extent.

Over seven in 10 (71%) say the COVID-19 has had a moderate-to-high impact on their financial situation. This is slightly down from 74% in a previous pulse survey.

Three quarters (75%) of participants say they feel poor or very poor about the current economic conditions in the U.S. This is up from 67% in the previous pulse survey conducted on April 10.

48% of respondents say they feel poor or very poor about their current financial security. This is up from 45% in a previous pulse survey.

Here are the top three most reported expenses that participants anticipate carrying a balance on their credit card monthly or more due to the COVID19 pandemic:

  1. Groceries (35%)
  2. Utilities (21%)
  3. Mobile and TV/Internet tied at 16% each

Nearly a third (32%) of participants say they have experienced a reduction in pay or work hours due to the pandemic. This is slightly up from a previous pulse survey (28%).

29% say they have been furloughed/laid off or lost their job due to the pandemic

Of those who have experienced some type of reduction in income caused by COVID19, 40% of participants say they have experienced a reduction in income by half or more than half

46% of participants think we are in a recession now (up from 39% since previous survey)…while over a third (35%) think that we are six months away from a recession.

65% say that the pandemic relief check is NOT enough to get them through the current economy. This is up slightly up from previous pulse survey (59%). But it is important to note that in our late March survey it was 31%!

Over two in five (41%) of respondents say that they are concerned about being able to feed themselves and their family, which is slightly down from a previous pulse survey (45%).

Update: April 15, 2020

In a pulse survey of 505 respondents we conducted April 10, we found some significant changes in the effects of the COVID-19 pandemic on consumers’ financial status, and in their concerns for the upcoming months.

Payment hardships

Half (50%) of the respondents in our update indicate they are already using one or more forbearance or payment hardship programs from a lender. And while those concerned about being able to afford to feed themselves and their families dropped from 56% to 45%, consumers are displaying increased concerns about the financial impact of the pandemic.

·  Government relief/stimulus check: 59% disagree that the check will be enough to get them through the current economy; in March, only 31% disagreed.

·  Stock market: 55% of respondents say the current market crash is significantly impacting them; in March, 46% said it was.

·  Sale of assets: 68% expect they will need to sell some assets in the next six months, versus 59% just a few weeks ago.

·  Refinance: Almost three-quarter (74%) will be looking to refinance because of changes caused by COVID-19, versus 62% in late March.

Reductions in income

While a quarter of respondents had experienced a 50% or more reduction in income in late March, by April 10, that rose to 30% of respondents. In the March survey, 27% indicated they were furloughed, laid off or had lost their job because of virus-related events; by April 10, 31% had experienced one of these events. In addition, 17% (13% W1) of hourly workers have lost 100% of their income versus 9% (7% W1) for salaried.

April 2, 2020

As COVID-19 strikes at the heart of the nation’s health, many people are already feeling the economic impact. We wanted to find out how people were feeling about their finances, the economy and COVID-19. Freedom Debt Relief commissioned Atomik Research to conduct an online survey of 2,335 workers who are employed full-time, employed part-time, self-employed/freelancers, homemakers/ stay-at-home parents, retirees working part-time, or those who have been unemployed for less than a month. The original field work was conducted March 25-27.

What we found out is that Americans are reporting notable changes in their current financial situations since the onset of the COVID-19 pandemic in the country. Even those who have not yet experienced effects are anticipating a negative impact on their personal finances and on the U.S. economy going forward.

Key Findings:

41% of those surveyed think we are in a recession right now, while an additional 37% think we will enter a recession within six months.

35% of those surveyed say COVID-19 has impacted their current financial situation; and an additional 40% say it has moderately impacted their current financial situation.

41% of respondents say they think COVID-19 will highly impact their financial situation six months from now; 39% think COVID-19 will have a moderate impact on their financial situation six months from now.

66% say they feel the current economic conditions are poor or very poor in the United States.

When asked what they anticipate will happen to them within the next six months due to changes brought about by COVID-19, the answers reflected a state of duress.

The Struggle to Pay Bills

Of significant concern is the finding that many are already struggling to come up with the money to pay for basic necessities, and more expect to have a hard time making regular monthly payments in the coming months. Particularly alarming is that well over half (56%) of those surveyed say they are concerned about being able to afford to feed themselves and their families.

In addition:

  • 45% report that they already are struggling to make their rent or mortgage payments.
  • 36% say they will likely miss their mortgage or rent payment within the next six months.
  • 49% say they will miss payments on some bills in the next six months.
  • 28% say they will likely miss their auto loan payment within the next six months.
  • 38% say they will likely miss their utility payment within the next six months.
  • 30% say they are likely to miss their health insurance premium payment within the next six months.

Precarious Positions in Debt, Cash Impact Thoughts on Stimulus Checks

Nearly a quarter (24%) of respondents say they have $50,000 or more in overall, unsecured debt. More than half have less than $1,000 in savings and checking accounts combined (excluding retirement accounts).

More than two out of five (41%) respondents say they will need to sell some assets in the next six months. A full 35% indicate they will be taking money out of their retirement savings.

When asked, “Which of the following would you spend your $1,000 check from the government on?” respondents answered with the following.

60% would spend the money on groceries

48% would spend the money on utilities (water, electric, gas)

37% would spend the money on housing

21% would spend the money on healthcare

Thirty-one percent disagree with the statement, “A $1,000 check each month from the government is needed to get me through the current economy.”

The Essentials

Because of the COVID-19 pandemic, respondents anticipate spending more on, or say they already are, spending more on everyday items.

  • 52% say they are spending more, or anticipate spending more, on groceries
  • 30% say they are spending more, or anticipate spending more, on healthcare
  • 35% say they are spending more, or anticipate spending more, on utilities (water, electric, gas, etc.)

Of concern, the following percent of respondents say they are, or anticipate, carrying a monthly balance on their credit cards for everyday expenses.

  • Groceries: 36%
  • Utilities: 21%
  • TV/Internet: 18%

Tightening Purse Strings on Discretionary Expenditures

Discretionary spending is facing a slump. Because of the COVID-19 pandemic, respondents are spending less – or anticipate spending less – on discretionary expenses.

  • 54% say they are, or anticipate, spending less money dining out
  • 37% report they are, or anticipate, spending less on entertainment
  • 37% report they are, or anticipate, spending less on retail expenditures

Females more frequently report they are, or anticipate, spending less in these areas. Forty-three percent of females are, or will, spend less on entertainment, versus only 32% of male respondents. Similarly, 43% of female respondents say they are, or anticipate, spending less on retail expenses, versus only 30% of male respondents.

Also, consumers in older generations are, or anticipate, spending less on entertainment compared to their younger cohorts.

  • 50% of Baby Boomers are, or anticipate, spending less on entertainment
  • 43% of GenX are, or anticipate, spending less on entertainment
  • 34% of Millennials are, or anticipate, spending less on entertainment
  • 15% of GenZ are, or anticipate, spending less on entertainment

Job Losses, Income Reductions Spur Changes to Retirement Plans

More than a quarter (27%) of Americans who participated in the survey have already experienced a furlough, layoff or job loss because of the pandemic. In addition:

  • 36% of participants have experienced a reduction in pay or work hours
  • 20% of Americans surveyed have experienced a reduction in overtime

Of those surveyed who report a reduction to their income, 34% say their income has been reduced by 50% or more. A quarter (25%) say their income has been reduced 25-49%, and 24% say their income has been reduced 10-24%. A third have changed their retirement plans.

CALIFORNIA

While their feelings on the wider economy were reflected in the attitudes of their nationwide compatriots, Californians were, on the whole, more optimistic about their personal financial situation during the COVID-19 outbreak. Well under half (43%) of respondents in California felt that their current financial security was poor or very poor (compared to 50% of participants nationwide), while 57% of Californians rated it very good/good.

Although residents statewide were more positive on their circumstances, many also felt the stark effects of the crisis. Nearly half (45%) of Californians said that COVID-19’s impact on their current financial situation was high, where only 35% of respondents across the country shared the same outlook. More Californians were also concerned about their ability to feed their family – 63% registered this concern, more than any other state which was oversampled.

FLORIDA

Across most areas, Florida participants shared similar responses as their nationwide counterparts: 63% of Floridians felt the current economic conditions were very poor or poor versus 66% nationwide, and 48% of residents statewide rated their personal financial security as very poor/poor versus 50% around the U.S.

Nevertheless, significant numbers statewide were either feeling a significant hit to their pocketbooks, or reported a minimal effect to none whatsoever. Just 10% of Florida respondents expected an income reduction of less than 10% (contrasted with 18% nationwide), while 18% of Floridians felt that their income would be reduced by 100% (compared to 12% nationwide).

NEW YORK

Respondents from New York, although New York City has become one of the epicenters of COVID-19 in the United States, did not report feeling that the wider economic conditions have deteriorated as much as participants nationwide. Only 55% of NY respondents argued that the current economic conditions in the U.S. were very poor or poor versus 66% across all participants, while 45% felt that the conditions were good or very good, over ten points higher than the nationwide sample at 34%.

This more positive economic outlook among New Yorkers also spilled over to their thoughts on their personal finances. Well under half of respondents (42%) rated their own financial security as very poor or poor (compared to 50% nationwide), and 58% rated it as good/very good. Additionally, 37% remarked that they disagreed that the current market crash affected them, contrasted with the 46% that felt the same from all participants.

TEXAS

Unlike New York, Texans’ results skewed closely to the national mean in nearly every significant measure: 68% of Texas respondents replied that the current economic conditions were very poor or poor, as did 66% of participants nationwide. Just over a third (35%) of Texas respondents remarked that they were highly impacted by the COVID-19 outbreak, matched by the same amount across the U.S. (35%). Likewise, 41% of statewide respondents said that there would be a high impact on their financial situation in six months from coronavirus, again matched by the same number nationwide (41%).

WASHINGTON

Overall, Washingtonians were the most pessimistic on the financial situation in the United States: 75% rated it as very poor or poor versus 66% across the country. While this was the case, respondents statewide skewed closer to the national mean on their personal economic situation (54% rated their financial security as good/very good, contrasted with 50% across all groups). 

However, interestingly some in the state felt that prices on several staples and commodities would remain the same throughout 2020, unlike their counterparts: 60% in WA felt that they would spend the same on healthcare, less than half – 48% – of total respondents felt the same; 71% said they anticipated spending the same on housing, versus 58% nationwide; 55% remarked that they thought they would spend the same on utilities, versus 46% nationwide.

It is clear that Americans have made abrupt shifts from optimism to pessimism about their financial situations. In a survey Freedom Debt Relief did just a few months ago, 70% of Americans said they felt the same or better off financially than they did a year ago, and indicated overall positive feelings about their financial futures.

Now, as the virus spreads and impacts households in every economic sector, the tide has dramatically changed. We anticipate a massive need for creditor assistance, and encourage anyone facing payment difficulties to contact their lender promptly. Most lenders are offering some type of assistance for those that are experiencing hardship. You can find a comprehensive list of lenders and creditors on our Blog.

Methodology: Freedom Debt Relief commissioned Atomik Research to conduct an online survey of 2,335 Americans, age 18-74+, March 25-27, 2020., an additional 505 Americans were surveyed on April 10, and then again on April 22.

Respondents were workers who are employed full-time, employed part-time, self-employed/freelancers, homemakers/stay-at-home parents, retirees working part-time, or those who have been unemployed for less than a month. The margin of error is +/- 2 percent, with a confidence interval of 95 percent. The margin of error for each oversampled state is +/- 7 percent with a confidence interval of 95 percent.

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.