BRACING FOR THE IMPACT OF ANOTHER ECONOMIC DOWNTURN: PEOPLE ARE REASSESSING WHAT IS ESSENTIAL FOR THEIR DAY-TO-DAY SPENDING
Households may face difficult decisions when shopping for necessities in the current economic downturn, particularly if they do not have the right financial plans and protections in place. However, professional knowledge and guidance is available to support those feeling the pressure. WFGIA agents are on hand to help.
Reassessing day-to-day spending and only shopping for essentials is typically the first response to economic uncertainty. During the last period of financial instability – the pandemic – reduction of day-to-day expenses (44%) and accessing savings (29%) were the most popular methods of responding to financial pressures.
In the 2023 economic downturn, where we are seeing inflated food and energy costs, and interest rates at a 14-year high, it has become more difficult than ever for families to stay on top of their day-to-day spending on basic goods, rent or mortgage payments. To cope, it is critical for many households to reconsider what they deem to be essential spending.
Our research highlights that over the next 12 months managing the day-to-day cost of living is the highest priority among households, with more than two-thirds (67%) identifying this as their top financial priority. This is followed closely by rent and mortgage payments at 49%.
Given these broader economic pressures from the financial downturn, it is unsurprising that people feel strained, and choose to focus on managing their current financial situation and short-term priorities. However, they must be careful that this emphasis on the short term is not at the expense of their long-term financial investments and future resilience.
For the most part, households are not prepared for unforeseen challenges that come from an economic downturn. Half of the general population in the United States and Canada feel they would be unable to sustain basic expenses for more than three months if the chief income earner were placed on indefinite leave. Additionally, one-fifth (22%) of the general population would not even be able to sustain themselves for a single month.
Having the right financial plans and protections in place is vital to effectively navigating a world economy recession and remaining resilient through economic shocks. While it can be challenging during periods of volatility, developing a financial plan ensures that when reassessing short-term priorities, people do not lose sight of their long-term goals and, importantly, continue to build financial resilience for their futures.
With expert financial knowledge, licensed WFGIA agents can review your current financial situation and help you to develop a financial strategy that will support your journey to a sounder financial future.
These findings are taken from an independent research study conducted by H/Advisors Cicero on behalf of WFG to better understand how households think about money, their goals and aspirations and their financial confidence, control, and understanding. This is part of their commitment to improving financial well-being and financial literacy for households across the United States and Canada.