Why COVID-19 Is Changing The Way We View Money
The COVID-19 pandemic upended the way people live their lives and view their money.
From mask mandates and stay-at-home orders to vaccines and protective strategies, the last two years have had no shortage of drastic changes to how we live day-to-day.
While the physical health of our communities will always be at the forefront of this discussion, there has also been a massive shift in the way people interact with their personal finances.
The pandemic may not have only changed how you spend money but has likely shifted the way you view your career and overall relationship with your financial circumstances.
What do these shifts mean today, and how could they impact the way you view money forever?
We’ve Changed The Way We View Money
Throughout 2020, Americans demonstrated a massive change in spending habits. According to the Bureau of Labor Statistics, the U.S saw the following trends:
Decreased Spending On:
- Recreational Services (i.e., Vacations and Dining Out)
- Transportation (i.e., Ubers, Gasoline, and Airlines)
- Clothing & Personal Care
Increased Spending On:
- Food at Home
- Housing Expenditures (i.e., Home Improvements and Furnishing)
- Recreational Goods (i.e., Media and Sporting Equipment)
At first glance, these trends are pretty logical. Being forced to stay home will undoubtedly increase at-home spending (food and home improvements). It also decreased activities that require our physical presence (vacations, dining out, personal care, and transportation). The more interesting thing to consider here is this period’s impact on future spending habits.
Questions to Consider:
- If you learned to cook during the pandemic and saved money by doing so, will you spend as much on dining out as you did pre-pandemic?
- Did you save money on gas and public transportation by working from home? Will your employer allow you to continue this work arrangement and help you reduce commuting costs?
- Did you purchase a Peloton and get in the best shape of your life at home? Will you spend money on gym memberships and cycle classes moving forward?
- After being stuck in your house for such an extended time, will you prioritize more family vacations and travel?
These questions simply prompt you to think about how you approach money in your daily life and how your priorities may have changed in the nearly two years the world has been adjusting to the pandemic.
Work Doesn’t Look The Same—At All.
In-person work arrangements were “put on a pause” in 2020. Employers and employees alike were scrambling to find ways to keep businesses running effectively. Some industries, such as restaurants and movie theatres, were unable to sustain themselves. Employers, employees, and investors felt the sting.
While it’s easy to point out the adverse effects COVID-19 had on business, some interesting benefits came as a result. There has been a cosmic shift in the way people think about work. Can your job be done virtually? Can you work less yet get more done? Will you travel more because you can work from anywhere?
Positive Changes In The Workplace:
- Virtual Work forced employers to adopt a digital work environment. Before the pandemic hit, too many businesses required employees to be in person because “it’s the way it’s always been done.” A virtual work environment can help employees spend more time doing productive work and less time commuting, getting dressed up, and making small talk at the water cooler (not to mention a better work-life balance). Study after study highlights that remote work hasn’t negatively impacted productivity the way many companies feared; in fact, it may have improved it.
- Save Time: If you were lucky enough to keep your job, you likely had more time on your hands than you have in years. According to the United States Census Bureau, Americans spent an average of 27.6 minutes in 2019 commuting one way to work. If you work five days per week and commute to and from work each day, that is almost 240 hours of commute time every year! Think about everything you could do with that time—spend quality time with your family and loved ones, pursue your hobbies, learn something new, etc. It isn’t surprising that people used their time differently, and it brought different priorities to light like time with family and friends, traveling, flexible work schedules, etc.
- Save Money: COVID-19 meant that more people were saving money each month. Without traditional forms of entertainment, you had a forced savings mechanism. You were not spending money on commuting and couldn’t leave your house to spend on discretionary activities. According to a research study done at the Federal Reserve Bank of Kansas City, Americans saved 33.7% of their disposable income in April 2020 (up from 7.2% in December 2019).
For many people, work is about so much more than paying the bills. It’s a way to grow professionally, make a difference in your field, and support a life you love. Now people are starting to think about work differently—as a way to help them live their ideal lives. Additionally, people expect more from their employers—more flexibility, better benefits, competitive pay, and a fulfilling role.
Are Your Priorities Different? Shift Your Finances To Match.
Given all the potential changes in your spending habits and work environment, what should you consider from a financial perspective?
Top 3 Financial Lessons Learned From The Pandemic
- You really need a fully-funded emergency savings account. Emergency funds (or lack thereof) came to the forefront in 2020. Those without emergency savings who experienced a drop in income learned a hard lesson. While it can be annoying to have money that is just sitting in a savings account, not earning much interest, circumstances like these show us how important it is to have money for a rainy day.
- The relationship between value and time was called into question. There has always been a subconscious philosophy in corporate America that time spent = value provided = money made. The COVID-19 pandemic put some pressure on that idea. The truth is, not all jobs require 80 hour work weeks, business suits, and in-person meetings to provide value to the company. In fact, businesses may be better off letting employees get their work done in an environment that suits them. You may want to ask yourself, what career will allow you to do the work you love while spending a desirable amount of time doing it in a productive environment?
- The type of work people are interested in pursuing is changing; are your skills keeping up? As we step out of the undertows of the pandemic and into this new work environment, how marketable are you? Do you have the ability to conduct work virtually? How marketable would you be to other companies or industries if you were to lose your job? Are you continuously honing your skills and developing professionally?
Life Changes, We’ll Help You Prepare
Change is inevitable, and if you’ve discovered some changes to your personal or professional life, that’s okay. Now it’s about putting yourself in the best financial situation to support your changing goals.
If travel is a top priority for you, perhaps you need to increase your savings for family vacations and not worry so much about buying a vacation house or other item that will tie you to one place.
Or maybe the pandemic highlighted that your work situation needs to change. It might be the time to start your own business or transition into a career change that will bring more fulfillment and joy to your life.
If you had some changes to your financial situation due to the COVID-19 pandemic (as most did), now is a great time to dial in your long-term financial strategy.
Schedule an introductory meeting with our team today and learn how you can succeed in the post-pandemic world.