As the U.S. economy gradually rebounds from the impact of the COVID-19 pandemic, many Americans are still working to regain financial stability. The crisis disrupted nearly every facet of daily life, with widespread job losses, business closures, and mounting household expenses making it nearly impossible for most to maintain the recommended six to twelve months of emergency savings. While government stimulus payments provided temporary relief, the financial strain persisted for many.
Now, as vaccination rates increase and public health conditions improve, the economy is showing signs of recovery—businesses are reopening, employment is rising, and consumer confidence is beginning to return. Yet, even with a recent surge in the personal savings rate, the picture remains mixed, with spending habits and financial priorities continuing to evolve.
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Key Insights
- In 2020, 64% of Americans identified as savers; by 2021, 80% planned to prioritize saving over spending.
- The COVID-19 pandemic underscored a stark financial divide—while some households managed to boost their savings, many others faced significant financial hardship and struggled to cover basic expenses.
- Core financial principles remain unchanged: building an emergency fund and developing a clear financial plan are critical, regardless of economic conditions.
- The crisis emphasized the importance of maintaining a budget, even a modest one, to better manage unexpected disruptions.
- Professional financial guidance is accessible—seek trusted referrals and approach your financial goals step by step.
- While a portion of Americans accumulated debt during the pandemic, others managed to increase their savings.
- Many savers are now eager to spend, but financial experts advise maintaining discipline and avoiding impulsive splurges.
The COVID-19 Financial Hit
Although the long-term economic outlook is gradually improving, many Americans are still navigating financial uncertainty in the near term. According to a recent survey by The Balance, nearly half of respondents reported having less than $250 left each month after covering expenses, and 12% said they had nothing left over at all. Mounting debt remains a concern, with 29% stating their credit card balances increased during the pandemic. A separate survey from Charles Schwab found that 53% of Americans had experienced some form of financial hardship due to COVID-19.
An even more sobering assessment comes from T. Rowe Price, where nearly 70% of respondents reported a decline in financial well-being, largely due to layoffs, salary cuts, and reduced work hours. Before the pandemic, 71% had sufficient emergency savings, but now 42% say they need to replenish their reserves, and 44% feel those reserves need to grow.
“The pandemic has reminded us of the importance of budgeting,” says James Boyd, education coach at TD Ameritrade. “When you know where your money is going, it’s easier to distinguish between wants and needs—and prioritize accordingly.”
But for many, budgeting remains a challenge. “COVID-19 affected individuals in drastically different ways,” says Brian O’Leary, senior analyst and wealth advisor at Aline Wealth. “The key takeaway is that financial circumstances can change very quickly.”
Only 33% of respondents in the T. Rowe Price survey said their finances improved during the pandemic, often due to reduced spending—a benefit not everyone could enjoy. While elevated savings rates were common over the past year, concerns are rising about a potential post-pandemic spending surge. Michael Resnick, senior advisor at GCG Financial, cautions that many may feel compelled to overspend in an effort to make up for lost time. In fact, 24% of Americans say they’re ready to splurge, according to Schwab, while 47% just want to return to pre-pandemic spending habits.
“We support that, but only if it’s done within reason,” says O’Leary. “That urge to spend should be part of a broader, responsible financial plan—one that includes a healthy buffer.” A recent McKinsey & Company report supports this outlook, showing that over half of U.S. consumers plan to splurge in the near future. Of those, half cite pandemic fatigue as a motivator, while the rest prefer to wait until the pandemic is fully behind them.
Spending Makes a Comeback
As vaccination rates climb and public health conditions stabilize, the desire to resume pre-pandemic lifestyles—and the spending that comes with them—is gaining momentum. “While COVID-19 upended nearly every aspect of American life, many are starting to see the light at the end of the tunnel and are ready for a reset,” said Jonathan Craig, senior executive vice president at Charles Schwab.
Consumer sentiment appears to support this shift. According to a Schwab survey, 64% of Americans identified as savers in 2020, and 80% said they intended to continue prioritizing saving over spending in 2021. Encouragingly, a McKinsey & Company report found that 86% of vaccinated respondents expect their finances to either return to normal by year-end or have already stabilized.
Retail projections also reflect renewed consumer confidence. The National Retail Federation (NRF) anticipates retail sales will exceed $4.3 trillion in 2021—up from $4 trillion in 2020 and $3.9 trillion in 2019—suggesting a strong rebound as consumers reengage with the economy.
However, financial experts caution against unchecked spending. “The core principle of financial planning—spending less than you earn, maintaining a long-term outlook, and keeping a robust emergency fund—proved essential for many of my clients during the past year,” says Michael Resnick, senior wealth advisor at GCG Financial.
Ryan Detrick, vice president and market strategist at Cornerstone Wealth Management, echoes that sentiment: “The long-standing guideline of saving six to twelve months’ worth of expenses remains relevant, but the pandemic may have given people a new appreciation for its importance.”
That message seems to be resonating. A survey by The Balance revealed that nearly one-third of Americans are saving more now than before the pandemic, and one in five have been able to increase their investments.
Steps for Those Barely Getting By
For individuals in a more financially fragile position, the road to recovery requires caution, planning, and patience. “We expect the economy to rebound sharply—and in many ways it already has—but that progress won’t be felt equally by everyone,” says Ryan Detrick, vice president and market strategist at Cornerstone Wealth Management. He notes that while various forms of debt were granted temporary forbearance during the pandemic, those protections are likely to expire, making it essential to prepare for resumed obligations.
Yet despite the importance of planning, only about one-third of Americans have a written financial plan. Among those without one, 42% cite insufficient income as the primary barrier. “From a fiscal standpoint, climbing out of hardship will require a significant, focused effort,” adds Brian O’Leary, senior analyst at Aline Wealth.
Here are key considerations for those struggling to regain financial stability:
- Assess your income outlook: If your pre-pandemic income isn’t likely to return, it may be time to consider a career pivot—an emotionally and financially difficult step, but one that could open new opportunities.
- Examine your expenses: If increasing income isn’t possible, look for areas to reduce costs. Negotiate payment plans where possible, and eliminate nonessential spending.
- Understand relief program timelines: If you’ve received mortgage forbearance, rental assistance, or student loan relief, review the terms closely. Know when those supports end and what your obligations will be afterward.
“There’s a wide range of actions available—but it takes creativity and a willingness to face tough decisions,” says O’Leary. While some solutions may involve sacrifice, he emphasizes it’s better to proactively make hard choices now than be left with none later.
The pandemic was a jarring reminder of how quickly life can be upended. “For many, this isn’t something they want to experience again,” O’Leary reflects. As the economy recovers, those burdened by debt must focus on realistic, incremental progress. Setting manageable short- and long-term goals is key.
Some practical first steps include:
- Talk with friends about what strategies have helped them—and what hasn’t.
- Ask for advisor referrals. Many financial planners offer free initial consultations, and organizations like the Foundation for Financial Planning provide pro bono services.
- Take it one step at a time. Progress may be slow, but consistency is vital.
Ultimately, the goal is to begin building an emergency fund—a lesson reinforced both before and after the pandemic. “Many people learned difficult lessons,” O’Leary says. “But what matters most is simply starting somewhere.”
Frequently Asked Questions
How much should I have in emergency savings?
Most financial advisors recommend saving three to six months’ worth of essential expenses. In uncertain times, aiming for closer to 12 months can offer greater financial security.
What if I can’t afford to save right now?
Start small. Even setting aside a few dollars each week can add up over time. Focus on tracking expenses, cutting non-essentials, and looking for ways to increase income, if possible.
Is it okay to spend more now that the economy is recovering?
It’s normal to want to enjoy life post-pandemic, but spending should be intentional. Prioritize needs, stick to a budget, and avoid debt unless it’s manageable and planned for.
What should I do if I’m still struggling financially after the pandemic?
Create a basic financial plan, evaluate income prospects, trim expenses, and seek help. Look into free or low-cost financial counseling services, such as those offered by nonprofit organizations.
How do I get help from a financial advisor if I can’t afford one?
Many advisors offer free initial consultations. Nonprofits like the Foundation for Financial Planning provide pro bono services to individuals in need.
I received forbearance during COVID-19. What now?
Review the terms of any deferred payments—know when repayment starts and what options are available. Contact your lender early to discuss manageable repayment strategies.
Conclusion
The COVID-19 pandemic reshaped the financial lives of millions, exposing vulnerabilities, widening economic gaps, and reminding us all of the importance of planning for the unexpected. While some households managed to save more, many others faced increased debt, job loss, and financial hardship. As the economy recovers and opportunities return, it’s crucial to apply the lessons learned—whether that means building an emergency fund, rethinking spending habits, or seeking professional guidance.