We’re on a path to a predictable and unfortunate outcome — millions of working Australians unable to meet their basic needs
in retirement.” COVID-19 is the most adept predator humanity has ever faced. Why? Because protecting oneself during the pandemic requires the sort of radical self-reflection that many people eagerly avoid.
And that’s especially true of personal finances.
Photo: Unsplash Source | Medium
Nobody wants to admit when they’re losing the financial game, just like no one wants to admit they’re choices could manifest
the spread of disease.
It’s this lack of transparency that COVID-19 feeds on, the results of which are already impacting personal finance. Job losses have
resulted in consumers taking on debt to pay their bills, and young are choosing risky investments in tangible assets and real
estate over diversified portfolios of stocks and bonds.
But, knowing these changes are happening isn’t enough. Getting back on track financially always begins with addressing
underlying problems, not just the physical symptoms.
Consumers are taking fewer actions to protect their identities
Pandemic fatigue is real. And between the economic downturn, massive job losses, and public health concerns, many consumers are choosing not to focus on protecting their identity.
A recent survey by LendingTree found 50 percent of respondents are not concerned about identity theft, and they are
increasingly less likely to take action to prevent it from occurring.
Similarly, 84% agreed that data breaches are becoming more common, which dropped from 91% in 2019.
According to a report by the Financial Health Network, only 29 percent of Australian households say they are “financially
healthy”, meaning their present financial planning ensures future success.
Globally, the numbers are not much better. Even though nearly half of the families in Japan and the United Kingdom report
being “financially healthy,” over 90 percent of respondents in Bangladesh, Kenya, and Columbia report experiencing some
financial insecurity, according to a 10-country financial health survey authored by Gallup.
For retirees and older Australians living on fixed-income, data breaches can be a death knell to their financial security because
most retirement plans have moved away from self-managed super funds to the pension.
“Taken together, rising costs and the challenge of accumulating and investing savings are making retirement an unsolvable
puzzle for most Australians.
“We’re on a path to a predictable and unfortunate outcome — millions of working Australians unable to meet their basic needs in retirement.”
Concern about credit is reaching a dangerous low
The same Tree survey also found that Australians are less concerned about checking their credit scores than they were last
year, with just 33 percent reporting they checked within the last year.
Most troubling, the report says, is that just 20% of those aged 75 and older reviewed their credit report in the last year, placing
them at an increased risk of fraud.
Respondents were also less likely to use other means of protecting credit scores such as reviewing bank statements and
changing banking passwords.
“So, it’s really important that you take the time to protect your credit, to protect your vital information, and to protect your finances. Because nobody’s going to do it for you.”
Focusing on eliminating debt and building an emergency fund
Many of the money problems people are facing during the pandemic were created by bad financial habits.
This is why many have taken the opportunity to shift their financial priorities toward building good financial habits for the
future during the pandemic.
Those include paying down debt, paying monthly bills, and building an emergency fund, according to a survey conducted by
However, these priorities are not shared among age groups. The survey found Gen Z respondents are more likely to be focusing
on finding better employment than Millennials or Gen Xers, who are focused on paying down debt.
“The focus should first be to establish at least a small emergency fund, with an amount of around $1,000. That can be used to pay for small emergencies, and that could prevent going further into debt,” Ken Tumin, founder of DepositAccounts said in a statement.
“After that, the focus should be to pay off high-interest debt. Once progress on that is made, the effort can go toward building the emergency fund along with paying off other debt.”
Moving money from equities to tangible assets
Charles Schwab’s 2019 Modern Wealth Survey found only about a quarter of millennials invest more than $100 per month in the stock market. Those numbers drop among Gen X and Z-ers.
Meanwhile, some analysts credit those age groups as being largely responsible for the recent housing market rally, as young
investors flock toward tangible assets in favour of equities.
Ellie Mae, a real estate market analytics company, recently reported that millennial buying power has increased while the
average mortgage loan interest rate has fallen to 3.25 percent.
Last year, 81 percent of loans taken out by younger millennials (born 1991–1996) were for purchases, while older millennials
are more likely to refinance their mortgage.
These trends have led many analysts to speculate that the housing market is heading for a cliff because it’s overbought.
“This is the strongest housing market in 40-plus years,” Johnson said. “Normally, a health crisis of this magnitude would introduce all kinds of uncertainty, which is bad for prices. So far, the market is holding up, but consumers should be careful. Strange things happen at the extremes of a market cycle.”
The future of personal finance is entrepreneurial
Maybe the greatest lesson workers are learning from the pandemic is that they shouldn’t rely on their employers to fund
A recent survey by Kiplinger’s Personal Finance magazine and the Alliance for Lifetime Income found that workers are less
confident about their ability to retire after the pandemic is over because of its impact on business owners.
Similarly, over 13.3 million students reported the pandemic has made them unsure of their financial future, according
to WalletHub’s 2020 College Financial Survey.
In response, many consumers are starting side hustles or businesses to supplement the lost income from their 9–5. Similarly, investors are recognizing the value of startups that cater to a nation on pause.
And while many analysts are bemoaning the future, low-interest rates and the nationwide reliance on eCommerce present a great opportunity for entrepreneurs. Businesses ranging from FinTech solutions to personalized vegetable planters are
popping up with no end in sight.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will
be accurate. Consult a financial professional before making any major financial decisions. You may contact us today.