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Staying Optimistic: Most Expect America To Reopen For Business By September

Majority of U.S. adults can no longer pay down debts and must prioritize spending to preserve cash right now.

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  • Many U.S. adults (44%) feel confident they have enough in emergency savings to get them through the coronavirus crisis, with 28% feeling very confident and 16% feeling somewhat confident. 

  • Still, Americans are hurting financially. More than a third of U.S. adults with debt (38%) plan to only pay the minimum on their monthly debt payments during the coronavirus crisis while 20% can’t pay their debts on time.

  • More Americans are prioritizing groceries (69%) over housing (45%) as an expense to continue paying for during the coronavirus crisis. This could be due to lenders becoming more flexible with mortgage payments and recently-enacted eviction protections.

Most Americans are expecting life to get back to “normal,” whereby social distancing guidelines are relaxed by the end of the summer or sooner. Currently, more than 2 in 3 U.S. adults (68%) expect the coronavirus crisis to subside enough in the next five months to reopen businesses (e.g., restaurants, bars, retail stores) that were forced to close. Comparatively, 23% say it will take at least six months or longer. 

To understand how Americans plan to manage their money through the coronavirus crisis, Tally commissioned an online survey conducted by The Harris Poll about a month after the first orders to shelter in place were issued. We asked 2,000 U.S. adults aged 18 or older when they expect the coronavirus crisis to subside as a way to understand how confident they feel about their savings, whether they plan to keep up their debt payments, and what expenses they think are the most important to continue paying. 

While there is some speculation that the coronavirus may return with flu season, few expect social distancing guidelines to still be in place through 2021. Among the majority (68%) who expect the coronavirus crisis to subside enough within the next five months to reopen businesses that were forced closed, people were almost evenly split between those who expect this situation to subside between May and June 2020 (33%) versus between July and September 2020 (35%). Both shares were much larger than those who expect the situation to subside between October and December 2020 (14%) and those who expect the situation to last into 2021 (9%).  

The bottom line is: most Americans expect the coronavirus crisis to last into September. Though some are confident that their emergency savings are enough, many can no longer pay down their debts and have reprioritized their spending to preserve cash.

Wealthier Americans More Optimistic About Savings

More than 2 in 5 U.S. adults (44%) feel confident they have enough in emergency savings to get them through the coronavirus crisis, with 28% feeling very confident and 16% feeling somewhat confident. Meanwhile, another 19% are hopeful they have enough saved to get them through the coronavirus.

This optimism may reflect people’s overall view that the coronavirus crisis will subside enough within the next five months to reopen businesses that were forced to close. However, Americans who are more optimistic tend to be better off financially. Those with a household income above $100,000 are more likely than those with a household income of less than $50,000 (74% vs. 65%) to expect the coronavirus crisis to subside enough within the next five months to reopen businesses that were forced to close. 

On the flip side, nearly a quarter of U.S. adults (23%) are either concerned they may not have enough or don’t think they have enough in emergency savings to get them through the coronavirus crisis. Another 14% say they do not have any money in emergency savings. This population was very likely already financially vulnerable before the economic shutdown. 

According to the Federal Reserve Bank’s most recent Report on Economic Well-Being of U.S. Households, many U.S. adults are financially vulnerable and would have difficulty handling an emergency expense as small as $400. While 61% would cover it with cash, savings or a credit card paid off at the next statement, 27% would borrow or sell something to pay for the expense and 12% would not be able to cover it at all. 

The coronavirus crisis has amplified this economic divide: Those with lower-paying jobs have become even more financially vulnerable. Though nearly 17 million people in the U.S. have filed for unemployment from March 15 to April 4 according to the Department of Labor, Americans who are not currently employed are about equally as confident they have enough in emergency savings to get them through the coronavirus crisis as those who are still employed (43% vs 45%). The difference in confidence becomes more apparent with income. Those with a household income above $100,000 are more likely to feel very confident they have enough saved to get them through the coronavirus crisis (40%) than those with a household income of less than $100,000 (22%). 

Many Can No Longer Pay Down Debts

Financial advisers often emphasize the importance of paying off debt quickly, especially high-interest credit card debt, by paying more than the minimum amount due each month. More than a third of Americans plan to keep that up during the coronavirus crisis: Among U.S. adults who currently have debt, 38% plan to pay more than the minimum payment or the full amount due. 

However, most people cannot or have opted to preserve cash. Another third of Americans with debt (38%) plan to only pay the minimum payment due while 20% say they can’t pay their debts on time. Of those who cannot pay their debts on time, 40% plan to pay less than the minimum payment due, 33% will likely default and 27% are working out a plan with their lenders. 

Income plays a big role. Among Americans who currently have debt, those with a household income of less than $50,000 a year are much more likely than those with an annual household income of $100,000 or more (29% vs. 17%) to say they can’t pay their debts on time during the coronavirus crisis. This is likely because people in higher-income households are much more confident in their emergency savings and are likely in a better position to keep up their debt payments through the coronavirus crisis.

Across generations, younger adults with debt are much more likely than older adults to say they can’t pay their debts on time during the coronavirus crisis. This may also be likely due to income as older adults, in general, are more likely to have higher incomes and more money in savings than younger adults. Specifically, 31% of 18-23 year olds (Gen Zers), 32% of 24-39 year olds (Millennials), and 21% of 40-55 year olds (Gen Xers) with debt say they can’t pay their debts on time right now. Only 7% of 56-74 year olds (Baby Boomers) say the same. 

Groceries and Utilities Prioritized Over Housing Costs

The coronavirus appears to have also flipped some spending priorities. Housing is usually the biggest cost and highest financial priority in the average American family’s annual budget, according to the U.S. Bureau of Labor Statistics’ report on consumer expenditures. This is followed by transportation, food, personal insurance and pensions, health care, and then apparel and services.

During the coronavirus crisis, groceries (69%) and utilities e.g., water, electricity, garbage (58%) are the top expenses Americans are prioritizing — these expenses are the most important to continue paying. The next most prioritized expenses are housing (45%), health insurance (45%), life insurance (27%), home entertainment e.g., TV streaming, movie rentals, video and mobile games (27%), car payments (27%) and takeout/delivery (20%). 

Meanwhile, expenses related to being social, going outside and interacting with people outside the home ranked lowest on people’s priorities. This includes clothing (13%), charitable donations (10%), childcare (8%) and fitness membership dues (6%).

Looking closer at food-related expenses, groceries are the one expense prioritized during the coronavirus crisis by an overwhelming majority of adults: Gen Zers (65%), Millennials (67%), Gen Xers (64%) and Baby Boomers (77%). However, ordering delivery and takeout from restaurants was prioritized more so by younger adults. Gen Zers (24%), Millennials (31%) and Gen Xers (20%) were more likely to prioritize delivery and takeout than Baby Boomers (11%).

Less than half of U.S. adults plan to prioritize housing (45%) as an expense to continue paying during the coronavirus crisis. Comparing homeownership status, homeowners (40%) were more likely to share this sentiment than renters (62%). So despite the growing #cancelrent movement and local orders to prohibit evictions, it appears more homeowners may have been able to deprioritize their housing cost than renters. This is likely driven by the accommodations ordered by Fannie Mae and Freddie Mac for lenders to be more flexible with borrowers to reduce or suspend payments for up to 12 months.

When it comes to home entertainment, Gen Zers and Millennials are more likely to prioritize this expense during the coronavirus crisis than Baby Boomers (35%, 31% vs 22%). In fact, home entertainment (35%) ranked third as a priority expense during the coronavirus crisis for Gen Zers after groceries (65%) and utilities (47%). Meanwhile, Baby Boomers were much more likely to prioritize health insurance expenses than Gen Xers, Millennials and Gen Zers (51% vs 41%, 42%, 33%). 

Ways to Boost Your Income Now and Later 

With the unemployment rate climbing week by week, preserving cash may seem like the only money move you can make right now. But that’s not true, says Tally’s personal finance expert, Bobbi Rebell CFP®, who shares her best tips for increasing your cash flow now and after the coronavirus crisis subsides.

Reassess Your Debts Now to Preserve Cash

Are you managing the payments to your mortgage, student loans or credit card debt in the best possible way? If you’ve been affected by the coronavirus, reach out to your lenders. Many financial institutions and companies will work with you to defer a payment or set up a custom payment plan (including Tally through its COVID-19 Relief Program). You can also give yourself a longer cash runway by consolidating your loans.

Give Your Savings a Partial Raincheck

Consider reducing your contributions to your savings and retirement accounts if you need to have more cash on hand. When you’re ready and able to contribute again, you can put more away at that time to make up the difference. 

Use Your Downtime to Invest in Your Career

If you can afford to not look for work right away, take this as an opportunity to build up your skill sets if you’re in a career that requires you to keep learning. For example, I’m using this time at home to take my continued education credits as a certified financial planner. Alternatively, if you’ve been thinking about a career change but never had the time to make it happen, now is the perfect opportunity to take the courses or certification that you need to do so. 

 

Methodology:

This survey was conducted online within the United States by The Harris Poll on behalf of Tally from April 6-8, 2020 among 2,000 U.S. adults ages 18 and older and among 1,484 U.S. adults age 18 or older who currently have debt. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact press@meettally.com