Planning matters

Unexpected Consequences

 

The COVID-19 pandemic has changed the world we live in, and not necessarily all for the negative. With the one-year anniversary of the first government shutdowns approaching, we look at the pandemic impact of things outside of our control.

 

Higher Savings Rates

Millions have lost their jobs or had income decline, so you’d think Americans would dip into their savings, but the opposite is true. The U.S. personal saving rate – the percentage of people’s income remaining each month after taxes and spending – skyrocketed to 33.7% in April 2020. Since then, its steadied to around 13.5% which is still much higher than we’ve seen in nearly 40 years.

Various pandemic factors influence a higher savings rate. First, with Americans working remotely, we’re not buying lunch, commuting and paying for gas, etc. Another is the derailment of our social activities. Concert tickets, events, shows, eating out with friends – with these items no longer being options – it means money saved. Another key reason (and perhaps the one we’ve seen the most of at Johnson Bixby) is a hold on travel plans. Households who had budgeted for a large vacation are saving thousands as travel came to a halt.

An increase in the overall U.S. saving rate hides an inequality though. While many are cutting back on their spending, a large portion of Americans live paycheck to paycheck, and are only able to purchase essential items. Pandemic or not, many Americans still aren’t able to save money.

 

Working Parents

The pandemic has shone a light on the balance many working parents try to achieve in managing caregiving responsibilities with their careers. While many workplaces were able to pivot to a work from home model, the closure of schools and daycares also meant children were at home and needing attention. Career advancement had to take a backseat and many workers decreased hours or quit jobs to help take care of the family.

A working parent in the service industry, owning a small retail business or working part-time likely took a financial hit as well. These industries have fewer safety nets in place to accommodate working parents and their need for more flexibility. 

The impact to careers in the pandemic not only means many are losing skills, but also damaging their finances in the long run because they can’t contribute to their retirement savings, ultimately decreasing future benefits.

On a positive note, we witnessed many of our clients taking advantage of the shut-in time by signing up for continuing education classes or getting a certificate or degree.

 

Rediscovering Self-Reliance

 Perhaps the area I find most fascinating with the pandemic is Americans quest to relearn skills and revive forgotten habits – many that were just a part of everyday life to generations before us.

From canning (my local store has been out of stock of lids since July) to gardening (the Burpee Company sold more seeds in March than any other time in their 144-year history) – Americans rediscovered that they can do many things for themselves that we’ve grown accustomed to outsourcing.

Whether we’ll continue to do things for ourselves or go back to a life of convenience, hopefully the pandemic taught us some hard-learned skills and confidence in our abilities to provide for ourselves.

 

One thing the pandemic has not changed is our relationship with you. We’re here to figure out the best way to invest your extra savings, listen to frustrations the pandemic has caused in your career and believe it or not, we’re even here to taste that homemade sourdough you learned to bake.

 

 

 

Written By Rachel Gorretta