The coronavirus pandemic has upended everyone’s life and led to some significant habit changes. The old (and ironically somewhat tired) personal finance advice of skipping a morning latte may be forced upon you if you no longer have a morning commute.
Such an impactful event also brings up questions of how people are coping and which new habits will stick when we no longer have to worry about the coronavirus. We talked to some experts to find out how COVID has changed us and what changes may be still to come.
FIGHT, FLIGHT, OR FREEZE
Looking back at how people initially responded to the coronavirus outbreak offers some insight into how a crisis can impact us.
“First and foremost, COVID is affecting our mental health by creating an initial stress response: fight, flight, and freeze,” says Dr. Alex Melkumian, founder of the Financial Psychology Center in Los Angeles.
Perhaps you’ve seen or experienced some of these responses. People “fighting” by updating their LinkedIn profile and jumping into a job hunt. Flight and freeze might look like avoiding the situation and putting off everything until the last minute. Although, a similar lack of response can come from optimism bias—the belief that everything will work out okay.
Of course, there’s more at play than an initial response, and people react differently depending on the situation. For example, after a layoff some people may avoid filing for unemployment due to shame or pride rather than a flight or freeze response.
Crisis responses have also played out in different ways on a large scale. If you think back to the early days of the pandemic (a lifetime ago), you’ll remember how panic-buying led to toilet paper shortages.
SOME FINANCIAL HABITS ARE ALREADY CHANGING
Over half-a-year in, people have had time to adjust, develop new routines, and implement changes. Some of these might not be habits, per se, but they can still have a long-term impact.
“A lot of what holds people back is that they think there’s all the time in the world to get it done,” says financial therapist Lindsay Bryan-Podvin. “When the reality hits… the fire burns to get things going.” Many of her clients are finally crossing things off their financial to-do list, such as getting life insurance or writing up a will.
A McKinsey & Co. survey from October 7, 2020, offers more insight into what types of financial habits may be changing:
- Most people are cutting back on discretionary spending.
- About 23% to 25% of people recently started using food or grocery delivery services for the first time, or are using them more often. Of those, over half plan to continue using these services after the coronavirus subsides.
- A small group (12% to 13%) is trying curbside store and restaurant pickup for the first time, and about half of that group plans to continue using curbside pickup.
- More than two-thirds of people are trying new shopping methods, brands, or stores. Many are “trading down” to find cheaper brands and retailers.
- Since the pandemic, people are increasingly aware of how companies care for their employees’ safety (23%) and a company’s purpose or values (17%).
- The increased use of social media, wellness apps, online streaming, and online fitness programs may continue post-pandemic. Topping the list of changes that may continue is an offline activity—regularly cooking.
Katherine Milkman, a professor at the University of Pennsylvania’s Wharton School, also recently shared some insights on what habits can be “sticky” in an interview on the Slate Gist podcast and article by Joe Pinsker in The Atlantic.
For example, it’s not hard to imagine someone developing a preference for a lower-cost brand or more convenient services. But washing your hands for 20 seconds might not stick when there’s no fear of a virus.
TRAUMAS MAY STAY WITH US
Specific habits aside, there could be a lasting impact on people’s relationship with their work and finances.
Even before the pandemic, the American Psychological Association’s annual Stress in America survey from 2019 found that most people listed work and money as one of their most significant sources of stress. The pandemic and resulting layoffs has only exacerbated those stressors.
“This is our Great Depression,” says Melkumian. “The level of anxiety and concern and worry could be exponential to where we were before. From a mental health standpoint, we’ll see an increase in financial trauma.”
There’s no single answer to how this plays out. The pandemic is affecting households in drastically different ways, and even those who are impacted in similar ways may have different responses.
“How much we’re going to be ruled by fear, caution, worry, anticipation, and doomsday scenarios is going to be part of our overall psychology and how we approach finance,” says Melkumian. “There may not be answers until we get there, but we need to beware of our psychology.”
He also draws the connection between financial stressors and the resulting impacts on how you may interact with your spouse or kids, and your overall wellbeing. “In turn, how does that affect your physical health? What happens to your family and identity as a provider and contributor?” Melkumian asks.
BUT THIS IS ALSO AN OPPORTUNITY FOR CHANGE
While the pandemic can cast a foreboding shadow over everything, if you can get out of crisis mode, it can also be a significant opportunity to rethink your life and the habits you want to change.
As Bryan-Podvin shared, some of her clients have done this by checking off some of their financial to-dos. She’s also observed a growing interest in making more drastic lifestyle changes. “They’re starting to consider what life would be like if they downsized housing and could retire earlier, or spend more money elsewhere,” she says. What might have been a daydream before has become a more realistic option.
“Obviously there’s a lot of uncertainty. We’re in a limbo pattern of not knowing when we can resume normal life,” says Melkumian. “But I’d love COVID to be the call to action to improve and increase our financial consciousness, awareness, and literacy.”
If you’re ready to start making some lasting financial changes, a free one-on-one counseling session is a great place to start. Our debt and budget experts are available 24/7 to help you discover resources, learn valuable skills, and begin realizing your goals.