How to Make Financial Well-being a Priority in Uncertain Times
Between the economic downturn and COVID-19, consumers are under immense financial pressure at a time when it’s more important than ever to think about saving money and planning for a stronger, post-pandemic recovery. Even amid such great uncertainty, there are still ways to save, get control of debt and credit, and boost financial well-being.
Financial well-being may seem out of reach for many people grappling with heightened unemployment as they grapple with the ongoing pandemic and its impacts. The slowdown in the U.S. economy as a result of COVID-19 has affected every sector of society:
While many individuals and businesses may feel unsettled during this unprecedented economic blow, that is all the more reason to not neglect one’s financial health, says finance expert and Capital One partner Farnoosh Torabi.
“Many people are financially challenged right now. They may have lost a job, face mounting debt or are living paycheck to paycheck. But as difficult as this time is for so many people, it is also an opportunity,” Torabi told TriplePundit. “I think we’re all recognizing in this pandemic what we really value. Our lifestyles pre-pandemic may not actually have been aligned with our needs versus our wants.”
We spoke with Torabi and other financial experts to find out how people at any income level can take control of their personal finances and begin to improve their financial health when it matters most.
To start saving, get back to the basics
Cultivating a savings mindset requires going back to the basics, Torabi explained.
“What have we learned about ourselves since the pandemic began, and how is that reflected in our budget?” Torabi said. “Are there things that you can cut out immediately like a website subscription or a gym membership you don’t use? Maybe it won’t be forever but just to shore up some much-needed cash.”
She also said that it’s important to tie savings to a financial goal that is personally motivating.
“Whatever that might be — being able to move out of your parent’s house, pay down credit card bills or have the cushion to enable you to quit your job — what are the long-term goals you want to reach?”
Having different types of bank accounts, from checking to savings to retirement accounts for long-term investing, can help hit those goals. For example, to prepare for unexpected expenses, Torabi suggests aiming to save up to 6 months’ worth of our basic living expenses — or as much as you can afford — into an emergency savings account that is separate from investment accounts designated for retirement.
“Our money serves different purposes,” Torabi said. “There's money that we need today. There's money that we may need in three to five years and then there's money that we don't want to touch for the next 30 years. It doesn't make sense to have it all in one place because we want that money to grow differently.”
She also says it’s key for people to lean into their support systems.
“There are a lot of resources out there that can support you,” Torabi said. “It might also be a friend you trust and can confide in who keeps you accountable. Just as with any big goal, there's power in the collective and momentum in working with others. Studies have shown that when we announce our savings goals to others, we are more likely to not only save but to save more than what we had initially set out to do.”
Use your resources
One available resource is SaverLife, a nonprofit that helps people build financial security and a Capital One partner. With 470,000 members, SaverLife aims to give working people the methods and motivation to take control of their financial future. Those interested can sign up at saverlife.org.
The median income for members is $25,000 and more than 80% of members are female or are parents.
“This is really aimed at the essential worker that has kept his or her country running during the last several months,” says Tania Brown, a certified financial planner with SaverLife.
Membership has shot up by 270 percent since the pandemic began and SaverLife has distributed a total of $3 million in emergency cash grants hardest during the pandemic. “This is the moment we’ve been saving for,” said Shana Beal, director of communications for SaverLife. “This is the time when suddenly everyone is focused on savings because so many people lost their jobs so quickly.”
SaverLife members were more prepared than most to weather the economic crosswinds. According to the organization, pre-pandemic, within six months of joining SaverLife, members more than tripled their savings rate and 52 percent deposited $500 or more into their savings account. SaverLife members save 14.2 percent of their income, compared to the 2019 national average of 7.7 percent. And its members are diverse: 40 percent white, 33 percent Black, 12 percent Latino, and 8 percent with multiple backgrounds.
Shift your mindset
In addition to providing budget tools, SaverLife gamifies saving by awarding points to users as they build their financial health, which can be redeemed for digital scratch cards with a chance to win cash prizes. The approach centers on “making savings easy and fun,” Brown said. “So even if you’re not ready or don’t know how much you can save or if you’ve never done it before, we want to encourage people to start as small as possible, a few dollars a week. Once it becomes a habit, no matter how small the amount put aside, the savings will keep growing.”
With 40 percent of American adults unable to cover a $400 emergency with cash, savings or a credit-card charge they could quickly pay off — even before the pandemic — “savings is the last line of defense to make sure there is food on the table, the bills are paid, that there is a roof over your head,” Brown told us. “When you start to look at it as insurance, it then becomes a priority. Life is going to happen — a drop in income, an illness, some unexpected life expense — and you need that savings in place as an insurance.”
Among the strategies that SaverLife advises for its members is automatic savings through payroll deductions. Another tip is to purchase a gift card for the purpose of dining out to limit that expense. “Once the card is gone, it’s gone,” Brown said. “That preserves the amount you intended to save.” Additionally, when an unexpected amount of money comes in — whether it’s a gift, a bonus or a refund — make it a practice to put at least half of that money into savings, Brown suggested. “I always emphasize to people it is the consistency over the amount,” she said. “Savings will always go up if you’re consistent.”
Overall, SaverLife sees savings as an important component of a more equitable U.S. economy, something Brown can relate to personally. “I grew up poor. I grew up on public assistance,” she told us. “I could go back to where I grew up and throw a stick and hit a payday lending place, a check-cashing place. When you think about all the components that go into what would be considered the American dream — owning a home, being able to retire — every single component of a more equitable world in terms of wealth starts with savings. When we have equity in terms of knowledge and what savings behavior looks like, people can start to develop those habits and build a better future for themselves and their families.”
Work to make financial well-being a priority
“People are dealing with so many stressful factors right now, and many people are feeling anxiety around [financial] issues,” said Kim Allman, senior director of community impact and investment for Capital One. “And while not everyone is in the same financial situation, people should make financial well-being a priority, if they can.”
Of course, this is easier said than done, but as Allman observes, even small savings allocations add up over time — and small mindset or lifestyle changes can make a big difference. “Taking action to set goals, identify and address roadblocks, and make plans can help empower individuals and help them prepare for the future,” Allman told us. "This can help to meet immediate needs as well as needs that may arise in the future.”
Capital One partners with organizations like SaverLife as part of its mission to “change banking for good” by removing barriers to opportunity and creating pathways to financial success. Building on this track record, the company recently announced the Capital One Impact Initiative, an initial $200 million, five-year commitment to support growth in underserved communities and advance socioeconomic mobility by closing gaps in equity and opportunity. That includes initiatives aimed at racial equity, affordable housing, small business support, workforce development and financial well-being.
“Financial empowerment isn’t just about information and awareness. We want to give people the tools they need to feel confident in their relationship with money, remove barriers and create channels to action,” Allman said. "We believe that finances should work for everyone, no matter where they are on their financial journey.”
This article series is sponsored by Capital One and produced by the TriplePundit editorial team.
Image credit: iStock Photo via Capitol One