Compared to 2020, tension and concerns about their household’s financial state is up considerably among Latvian residents. Over the course of the last one and a half years, it has increased 14%. 66% of residents in Latvia face concerns about their family’s financial stability every month. 27% of them face it every day, according to a survey performed by Swedbank Institute of Finances.
Outlooks about possible changes in the future are generally pessimistic, with residents more often than not expecting the financial situation of their household to worsen.
In regards to slower economic development and price growth, residents are worried the most by the significant drop of income (61%), with 50% of residents concerned about their ability to financially take care of their family and 47% of residents concerned about their ability to cover basic needs and monthly payments. Nearly half of respondents (49%) are worried about losing their job – most of these people are of pre-pension age, residents of large regional cities and residents in the low income group.
According to results of the survey, a large number of residents are pessimistic when it comes to expectations of their future financial situation.
Only 20% of respondents believe their financial situation will definitely or very likely to improve in the next 12 months, whereas 41% of respondents believe the financial situation of their respective family will worsen in the coming months. 28% of respondents do not expect any major changes.
Residents of 18 to 29 years of age are the most optimistic – 40% of them believe their financial situation will improve.
Optimism goes down as the age of respondents goes up. Only 9% of interviewed senior citizens hope for their financial situation to improve. Residents with low income are also cautious about their future financial situation.
«Without a doubt, the fight over financial affairs and concerns about monetary affairs leave an impact on different aspects of our lives – work productivity, relationships and health. Financial planning and review of expenditures are the two main ways to help preserve a level of security and peace of mind. Although it may seem self-evident, many residents are not doing to well with it – according to results of the financial test of Swedbank Institute of Finances, 46% of Latvian residents do not perform budget planning or do it in their heads, which is a very unsafe planning method,» comments Swedbank Institute of Finances expert Evija Kropa.
«In moments of crises we consider plan B and money reserves. This helps ease financial shocks to the family. The more careful and faster the personal budget revision, the more easily it is to adapt to the situation.»
According to responses, residents use two main strategies to manage their finances in situations of financial tension: pay more attention to financial planning and follow their family budget (39%) and review their expenses, limiting them whenever possible and focusing on only necessary purchases (35%).
33% of Latvian residents avoid taking new loans and 29% look for ways to reduce energy consumption due to rapid price growth.
Only 23% of residents (mostly recipients of high income) continue mostly enjoying life without limiting their expenses whenever possible.
When it comes to reduction of expenses, residents are mostly prepared to review their expenses in positions like going to cafes and restaurants (56%), travel (43%), culture and entertainment events (34%). 33% of residents consider reviewing their expenses on clothes and footwear, whereas 29% would be prepared to reduce their expenses in positions like food and transport. Residents are generally not prepared to cut expenses in positions like healthcare (5%), education (8%) and housing expenses (10%).
Kropa said: «It is possible to reduce expenses by reviewing priorities and structuring expenses in three categories – mandatory, necessary and desirable.»
«Mandatory payments or utilities, loans and other bills are performed as usual because doing so does not have negative consequences. Necessary expenses are those we need but can cut in some positions, such as food, clothes and transport. It’s the easiest to save on desirable expenses, such as sweets, new footwear and entertainment.»
«It is important to keep in mind that addition of expenses to mandatory, necessary and desired may differ between households. This is why the strategy tends to differ as well,» admits Kropa.
At the same time, 19% of residents, mostly youngsters under the age of 30 (30%), said that under the current economic consitions they are looking for ways to make some extra money.
Poor financial state increases tension in Latvian households
