10 Ways 2020 Has Changed Americans' Finances

Author: Kailey Hagen | November 30, 2020

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2020 is finally almost over

History will remember 2020 as the year of the COVID-19 pandemic, but for those of us who are living through it, we're just as likely to remember the economic effects, some of which will outlive the pandemic itself.

Many of the changes have been tough, especially for those who were struggling financially before the lockdowns started. But for others, this year has caused them to reexamine their habits and make smarter financial choices they'll benefit from going forward. Here's a look at 10 ways 2020 has changed Americans' finances.

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1. Millions lost their jobs

The most significant and devastating of COVID-19's financial effects is that millions of people were temporarily or permanently laid off as the nation shut down in an attempt to contain the spread of the virus.

These workers found themselves without a steady source of income, and many had to rely upon unemployment benefits until they could return to work or find another job. The CARES Act, passed by the federal government in March, offered unprecedented aid to these workers, including an extra $600 per week in unemployment benefits, though this ran out at the end of July. Many workers remain without full-time employment.

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2. Some tapped their retirement savings early

For those who used up their emergency funds or didn't have one, retirement savings became a lifeline to help them cover their expenses. The government waived the penalties on early retirement withdrawals and has given anyone who took a COVID-19 hardship withdrawal in 2020 up to three years to pay taxes on their distributions.

This can reduce the strain on your finances in the short term, but it could create a bigger long-term problem if you don't alter your retirement plan or increase your savings in future years to make up for the shortfall.

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3. Others are saving more

The stay-at-home orders have disrupted routines and travel plans, but some people are making the best of it by saving all the money they'd normally spend on going out or traveling. You can use this extra savings to pad your emergency savings or save for a long-term goal.

If you're trying to save more this year, consider stashing your money in a high-yield savings account. These offer better APYs than you'll find with brick-and-mortar banks, which can help you grow your wealth more quickly.

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Masked delivery man bringing groceries to a woman's home

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4. We're spending money on different things

People aren't going out to the movies or to restaurants like they used to. Instead, they're channeling all their extra cash into stocking up on essentials for their homes. You've no doubt seen your local grocery store's shelves cleaned out once or twice because of this.

People are also changing how they buy things. Grocery delivery services, for example, have become much more popular as people look for ways to get what they need without getting too close to others.

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5. People have enrolled in hardship assistance programs

In response to the economic crisis, many banks and other financial institutions have set up hardship assistance programs, so those who are unable to keep up with their payments don't see their credit ruined as a result of pandemic-related financial issues.

These programs may waive certain fees or enable you to defer payments for a few months without hurting your credit score. But your balance usually continues to accrue interest. That could place a bigger financial burden on you once you have to begin making payments again, so it's best to pay at least the interest every month if you're able to do so.

Our credit card expert uses this card, and it could earn you $1,148 (seriously)
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.

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Mature man and woman sitting in kitchen looking at laptop computer and smiling

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6. It's a great time to refinance your loans

The Federal Reserve has slashed interest rates in an effort to stimulate the economy, and that's great news for borrowers because it makes all types of loans more affordable. Many Americans have taken advantage of these lower rates to refinance their mortgages and other loans to reduce their monthly payments.

This may be worth considering, especially if you're worried about keeping up with your bills right now. But remember, you still have to pay new closing costs to refinance your loan and that affects how much you're actually saving. Weigh these costs to decide if refinancing makes sense to you.

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Young woman with look of frustration on her face looking at her laptop screen

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7. Savers aren't earning what they used to

The downside to the Federal Reserve slashing interest rates is that rates on savings accounts and certificates of deposit (CDs) usually drop as well. Though the best high-yield savings accounts still outearn brick-and-mortar savings accounts by a considerable margin, their rates have fallen considerably since the start of the year.

If you'd like to earn a better rate on your money, you could try investing in a CD, though these rates have also suffered because of the pandemic. You could also try investing your money in the stock market if you don't think you're going to need it in the next few years.

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Financial chart

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8. Investment portfolios have taken a roller-coaster ride

The pandemic brought about the end of the longest-ever bull market, and since then, the stock market has been extremely volatile. This has some investors, particularly retirees and those close to retirement age, nervous about their savings and how to manage it.

Withdrawing your money from the stock market completely usually isn't a wise move. Now's not the time to make any rash decisions. Make sure you keep your money diversified and choose investments that align with your risk tolerance. And if the daily ups and downs are stressing you out, consider checking on your portfolio less frequently until things stabilize a bit.

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9. People are planning to retire later

In part because of the stock market volatility and the increased number of early retirement account withdrawals, many people are now planning to put off retirement for a while longer so they have extra time to get their finances in order.

This is a smart move for those who don't think they'll be able to increase their retirement contributions enough going forward to make up for what they've lost this year. Delaying retirement is one of the fastest ways to resolve a savings shortfall because it gives you extra time to save while reducing the length, and therefore the cost, of your retirement.

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10. The financial health gap is widening

Those who were able to continue working more or less uninterrupted during the pandemic may not have felt much of a financial strain this year. Some may have even benefited from the government stimulus checks and better rates on loans.

But for those who lost their jobs, even the government aid hasn't always been enough to make ends meet. These individuals will likely face a longer and more difficult road to financial recovery.

Our credit card expert uses this card, and it could earn you $1,148 (seriously)
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, help raise your credit score, and can put hundreds (or thousands!) of dollars in rewards back in your pocket each year.

But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until late 2021, has some of the most generous cash back rewards we’ve ever seen (up to 5%!), and somehow still sports a $0 annual fee.

That’s why our expert – who has reviewed hundreds of cards – signed up for this one personally. Click here to get free access to our expert’s top pick.

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A champagne cork on January 1st calendar date

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Let's see what 2021 brings

The pandemic isn't going to end with 2020 and nor will this financial crisis. We'll have a new president in 2021, and the government may continue to pass new laws and aid packages to support those who are experiencing financial hardship. Only time will tell.

In the meantime, we all need to continue being smart about our money. That means budgeting carefully and looking for every opportunity to save money. Keep discretionary purchases to a minimum, at least until things begin to return to normal, and keep checking for news about new financial assistance resources to help you weather the storm.

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