Millions of Americans are in “survival mode” – beware, decisions made with this mindset can make or break you

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On Thursday night, President-elect Joe Biden said he would seek $1,400 stimulus checks and more vaccine funds in a $1.9 trillion coronavirus economic relief package when he takes office. function this month. One caveat: Analysts say that after debate on the proposal in Congress, the final COVID-19 bailout package is unlikely to be as generous as the one currently being proposed.

It couldn’t come too soon for millions of Americans. More than a third, 38%, of people say they will be in “survival mode” in 2021, according to Fidelity Investments’ annual Financial New Year’s Resolutions Study.

Survival mode involves focusing “on the day-to-day as I try to get myself and/or my family through the next year,” said the poll of more than 3,000 people.

The older the participant, the more likely they are to feel this: 43% of Baby Boomers (56-74) said they would enter survival mode in 2021, while 34% of Millennials (24 -39 years old) said the same thing. .

“Unfortunately, our ability to see the big picture is severely limited when we’re in fight-or-flight mode,” Andy Baxley, a Chicago-based financial planner told the Planning Center.

“This can lead to choices that seem logical in the heat of the moment, but have the potential to cause significant long-term damage,” he added.

Getting out of “survival mode” starts with trying to imagine what your life will be like a year from now and wondering what changes need to happen to feel more secure, Baxley said.

“Then I encourage people to think of one thing that is relatively easy to accomplish and will have a significant impact in moving them in the right direction. Sometimes a small step is all it takes to start building momentum, a- he declared.

Who is in the worst financial situation?

Overall, 29% of people reported being in worse financial shape entering 2021. That’s up from the 19% of people who told the recurring poll they were in worse financial shape entering 2020.

Almost (23%) of survey participants said they had lost a job or family income, and 18% said they had to ask friends and family for money.

Overall, more than two-thirds of Americans surveyed experienced some type of financial setback in 2020, Fidelity said, and 34% said their top financial concern was rising food and other costs. necessities.

The findings add to the pile of polls and statistics indicating that, nine months into the COVID-19 pandemic, a quick recovery remains elusive for many.

For example, a quarter of people felt they were in a more difficult financial situation in September than in March, according to an Urban Institute study published more than a month ago.

See also:Opinion: The K-shaped economic recovery: For half of America, the economy is still terrible

The deterioration was most pronounced for minority households, with more than a third of Latino participants saying they were in worse condition.

Nearly 30% of black households said they were regressing. More than 40% of people below the poverty line before the pandemic said things were getting worse, according to the Urban Institute noted the researchers.

But the kind of scraping “survival mode” discussed in the Fidelity survey is something that predates the pandemic, the Urban Institute findings suggest.

“Even before the pandemic, many people struggled to meet their basic needs such as food, rent and health care,” said Michael Karpman, senior research associate at Urban and lead author of the report.

“But the recession hit people who were already struggling financially the hardest,” he added.

See also: The 245,000 new jobs added last month are the smallest since the US recovery began in May

People can go into “survival mode” because they’re preparing for what’s around the corner – or, indeed, what’s not around the corner right now.

Fidelity’s findings come as many crucial financial guarantees, collection pauses and protections will disappear by the end of the month, absent action from Congress.

“Sometimes it’s just that forward momentum that brings you closer”

So, if a cash-strapped person goes into financial survival mode, what should they do to get better?

Accept small steps, like reaching out to a friend about a job prospect, refreshing a resume or committing to a personal budget on paper, said Meredith Stoddard, vice president, life event experience at Fidelity.

“Sometimes it’s just that forward momentum that brings you closer,” she said. Although it’s “easy to think of a worst-case scenario”, Stoddard said it was better do not be overwhelmed with emotion.

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Try a 50/15/5 split of your income, Stoddard explained.

There’s 50% for necessities such as mortgages and bills, 15% for retirement savings (cash in a 401(k) business match), and 5% for short-term savings, such as a emergency fund. The remaining 30% would be for things like tax bills, charitable contributions and childcare.

But the guidelines are only “ambitious” and should create more pressure, Stoddard said. “If you just lost your job or took a pay cut, the rules of thumb are meant to be general guidelines.”

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