By Stephen Fournier – KeyBank Central New York Market President
With the latest reports of millions of people making career changes or exiting the workforce, it’s become clear that Americans are piecing together a new way to approach their financial lives; leaving behind old habits, creating new ones, and seeking the work-life balance they desire. Since the Covid-19 pandemic struck the U.S. in March of 2020, we have reached a new normal of Americans gaining financial confidence and adopting technology to do so.
According to our recent KeyBank Financial Mobility Survey, which polled more than 1,000 Americans on their financial attitudes, patterns, and opinions:
- 62% say work-life balance is more important than a high-paying salary (22%)
- 71% of “financial experts”—i.e., people who report their money savviness as high—are very confident in growing their finances, despite the same group being most likely to admit to a financial “faux pas”—or a money misstep
- 48% say that the number one thing that made them feel financially resilient during the pandemic was financial information
- 23% say they have more experience with digital banking in 2021 compared to the year before
There’s clearly a personal finance paradigm shift underway. In the midst of a “Great Resignation” and a societal focus on equity, what does financial mobility truly mean?
Rethinking Work-Life Balance
The pandemic brought with it many tough changes that we have continued to deal with in 2021; yet 25% of Americans say they have experienced an improvement in their standard of living compared to 2020, highlighting a shift in how we think about mobility in the face of challenge.
What’s been coined “The Great Resignation” has impacted American’s outlook on work and financial priorities. Two in 10 Americans (22%) have made a career shift since the pandemic began—whether it’s choosing to retire (22%) or leaving for a different role (21%). More than half (51%) of respondents say the pandemic has also altered their financial priorities and has made them think more about how to grow their finances.
The perfect balance between work and life can mean different things to different people, and the factors that Americans prioritize to remain resilient on their individual work-life balance journeys may vary. That said, it’s true that for all Americans lifestyle factors play an important role. Nearly half (43%) of say a good night’s sleep makes them feel more financially resilient, as well as a proper diet and exercise (35%), personal connections (24%), mindfulness exercise (24%) and open communication with loved ones (35%).
The ‘Perceived’ Financial Expert
People who say they are money “experts” tend to be risk takers—and it can pay off. According to our survey, 79% who self-report their financial savviness as “expert” say they have made a financial faux pas—the top three including spending a tax return instead of saving, reacting to market volatility and relying on non-experts to make decisions. They are also more likely to identify with a YOLO financial attitude (34%), compared to cautiously optimistic (32%) and playing it safe (31%).
While making faux pas and approaching finances with a YOLO attribute may not exactly seem like expert behavior, it highlights a connection between financial experience and confidence. Taking risks can translate into confidence, as they are able to learn and grow their financial skills for the future.
Digital tools are also used more often among “financial experts”—44% say they relied more on digital banking tools in 2021 vs. the year prior. This behavior can directly point to a correlation between savviness, confidence, and digital banking tool usage.
Bridging the Gap for Underserved Communities
While the data shows that financial information is critical to resilience, we know that access to information can be a challenge for underserved communities.
In fact, 34% of people who make less than $49,000 per year report being “not financially savvy,” compared to the 16% of Americans who make more than $50,000 in annual salary. To add, Americans who are making less than $25,000 annually report spending more and saving less in the past year (18%), potentially pointing to social determinants of financial mobility.
At KeyBank, we know the importance of bridging the gap and supporting individuals and families on their unique financial mobility journeys.
That’s why we are committed to providing access to financial tools and information that enable mobility, no matter what that means to you. For instance, products like the Secured Credit Card, Cashback Credit Cards and Hassle-Free Checking help Americans build credit and discover their personal paths on their financial journeys. We are consistently evolving and developing our banking tools to help better guide our clients on financial decisions and navigate them through changing lifestyle and economic markets.
About the author: Stephen Fournier is President of KeyBank’s Central New York Market. He may be reached at either 315-470-5096 or [email protected].
Checklist for Smart Budgeting
Budgeting is about controlling what you can control. Everybody’s budget, spending and savings plan is different. In fact, yours will be as unique as you are. It’s important to make your plan fit your lifestyle and goals.
You can review this checklist periodically and make adjustments, if needed.
To reach our financial goals, it helps to first define exactly what they are. What goals inspire you to take the next step and allocate your income in deliberate ways? Setting both small and large goals can help you make short- and long-term choices to hit multiple financial targets over time.
Know your income.
Knowing how much money you make each month helps you responsibly divide where it goes. If you’re paid roughly the same amount every paycheck, then it’s easy to plan expenditures that stay consistent with your income. If your pay fluctuates, then calculate an average of your earned income over the last year.
Detail typical expenses.
Do your spending habits promote your lifestyle, goals and values? What needs to change? It’s helpful to divide your expenditures into a few categories: needs, wants and savings.
Drill down on debt.
Effective budgeting means paying back debt on time to avoid unnecessary costs for late fees and to build and protect your credit score. In some cases, paying back debt early can save you a substantial amount of money in the long run. Use this infographic to better understand debt consolidation, in which you pay off several debts and replace them with a single balance.
Build your reserves.
Savings are your friend. Set aside a fixed amount of money or percentage of your income in a savings account each month. Having an emergency fund – enough to cover at least six months of expenses – is essential to help you weather unexpected events, such as a job loss or healthcare issue. Most people save a little at a time, over years.
The price of everyday goods and services is on the rise. Having a handle on the current costs will help you stick to your budget. Delay big purchases to allow the price to stabilize or go down – this will allow you more time to save as well.