A Two-Year Retrospective on COVID

 

Two years ago this month, we all knew something really bad was coming. On February 2, 2020, global air travel was restricted and, on February 3, a public health emergency was declared in the U.S. three days after the World Health Organization (WHO) did the same. 

By February 25, 2020, a CDC official was predicting that COVID-19 was heading toward pandemic status, which was officially declared by the WHO a few weeks later on March 11.

Below are ten Barbservations about what I’ve noticed and experienced since COVID-19 took hold in February 2020:

New Mindsets About Priorities- Many people have adopted a new “life is too short” mentality, which is informing decisions about retirements, job changes, relationships, and more. We have all collectively seen that, despite our best efforts, plans can “blow up” and life during a pandemic is incredibly uncertain. Many people are making major life changes so they do not waste their precious time. I can count dozens of colleagues who have quit jobs and moved on.

Transferrable Job Skills- It has been interesting to watch colleagues “move on” to new careers. Just like I parlayed my knowledge, skills, and contacts from four decades at Rutgers University to a full-time financial education company so, too, they transferred their talents. A former journal editor now creates content for a large financial planning advisor group and a former Cooperative Extension financial educator develops content for a growing fintech firm for financial planners.

End of Life Planning Salience- Salience is when something is particularly noticeable and stands out. The death of almost 1 million Americans due to COVID-19 is certainly an example of  so-called “mortality salience,” an awareness that death is inevitable. The Wall Street Journal reported that more young adults (Millennials) have been prompted to write wills, citing unease about the pandemic. It could happen to any of us! COVID-19 has sparked, even normalized, conversations about end-of-life planning as people of all ages realize that “It’s always too early until it’s too late.”

The Only Constant is Change- We all hoped that, with effective vaccinations, COVID-19 would be a distant memory by now. It is not. Delta and Omicron variants, and responses to them, have shown us that anything can change. Flexibility is the name of the game. Employer policies, tax laws, school masking rules, and government rules can change quickly. This has highlighted the need for “Plan B Thinking” (i.e., “What’s your Plan B?”) and “If/Then Thinking” (i.e., “If [X] happens, then I’ll do [Y]”).

Hesitancy to Plan- I, like many people, am hesitant to spend money on advance deposits for events that may be cancelled. Why wait for a refund and face the uncertainty of rebooking? Hence, I am currently running an $18,000 tab for a 14-day cruise/land package and first class airfare to Alaska this fall. Payment is due in June. If I don’t feel comfortable traveling, or Canada closes its border to Vancouver again, I’ll simply walk away.

Workarounds and Substitutes- We have all heard the words “supply chain issues” and “labor issues” frequently during 2021 and have gotten used to disruptions. This has changed people’s expectations and behaviors. Some people decided to go back to stores to shop rather than take a chance that shipped items ordered online would be delayed. Others sought out thrift shops and peer-to-peer shopping platforms, such as Facebook Marketplace and eBay, to buy available items.

More Time for Healthy Habits- Living a healthy lifestyle is the best thing that people can do to control their health care costs. Fortunately, COVID-19 gave many people the “gift of time” as working at home replaced long, time-sucking commutes. This provided an opportunity for a “lifestyle reset.” According to Consumer Reports, some of the healthier habits that we adopted include proper hand-washing, more home-cooked meals, and virtual activities to stave off isolation.

Tough Times Prompt Big Changes- In challenging environments like the past two years, organizations often make big structural changes. Often, but not always, these large bursts of change are positive. Recently, we’ve seen advances in the speed of vaccine development, artificial intelligence innovations, higher wages dues to millions of available jobs, and employers paying more attention to workers’ work-life balance, workplace stressors, and burnout. Pandemic-related changes that were originally meant to be temporary (e.g., telecommuting) may prove “sticky” over the long term.

Risk Perception is Stressful- For two years, we've had to risk-calibrate so many personal decisions. Do you wear a mask to an indoor party and awkwardly not eat or drink (much), take your chances and go mask-less, or just not go at all? It has been mentally exhausting trying to process how likely different events are versus how scary they seem, on a daily basis.

Limited-Time Opportunities- Opportunities opened up for some people to profit financially from COVID-19 impacts. Companies that provided “just in time” products and services (think Zoom, Instacart, and Clorox) for example. I personally observed retirees increase their nest egg by well over $100k by selling their house at peak prices and downsizing. Inflation-adjusted Series I bonds paying 7.12% from 11/1/21 to 4/30/22 are another limited-time opportunity example.

This post provides general personal finance information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

More Miscellaneous Insights From Recent Webinars

 

As I mentioned in three previous posts, I love learning new things and often attend webinars and podcasts to gain knowledge and/or continuing education credits for my CFP® and AFC® as well as to connect virtually with others. 

Below, in no particular order and on a variety of topics, are nine financial “nuggets” that I heard recently.

 

¨     The Key to Building Wealth- There is no “secret” formula for wealth accumulation. Rather, the way that most people accumulate assets and become millionaires is to save as much as they can as soon as they can. Wealth is built by investing over time and compound interest over four or five decades of regular deposits is the key to success. That said, it is important to acknowledge that many people get a late start. That is reality and late savers need hope, encouragement and options. Saving later in life is still much better than not saving anything at all.

 

¨     The Power of Empowerment- People often have more power than they think they have, can do with a lot less shame and blame about past mistakes, and need to feel that they are in charge of their life. Financial well-being begins with a strong foundation of positive cash flow. An analogy used in a webinar is that, just like you don’t put on perfume without first taking a shower, you shouldn’t buy investments without having a budget with positive cash flow. Budgeting is the cornerstone for financial well-being.

 

¨     Key Financial “Need to Knows”- A panel of personal finance teachers on a CNBC webinar for Teacher Appreciation Week described the following concepts that all students need to know: start investing today, invest with low-cost investments, check for licensed sellers and registered investments, develop and follow a budget, understand your retirement savings plans, and consider a target date fund as a retirement plan investment.

 

¨     COVID-19 Impacts- A speaker at the three-day Wall Street Journal Future of Everything Festival noted that a big post-pandemic issue will be the large amounts of money put into the economy and the inflationary stimulation this is causing. A second issue is the grief experienced by many people, which has focused their priorities and clarified what matters. Many more employees today are vocal about work load concerns and work-life balance. They have also realized that they can be pickier about ways that they “lean in” at work and don’t need to be at every event. They can pick and choose.

 

¨     COVID-19 Comebacks- We should all expect that the process of re-emerging from the pandemic will be awkward. CDC guidelines will continue to evolve over time and people have different levels of “cautiousness” as they have had throughout the pandemic. Companies in many industries (e.g., restaurants, ball parks, and airlines) are trying to anticipate how their employees and customers are thinking and to make them feel comfortable. Not every company will get it right.

 

¨     Retirement Plan Withdrawal Caution- A webinar, The Impact of COVID-19 on Retirement Savings, by Consumer Action, noted that the CARES Act made it easier for people to take withdrawals from their retirement savings plans to pay bills. That said, participants were advised not to do this unless they absolutely have to. Alternatives to generate cash include savings that is not in a retirement plan (if any), employer assistance (e.g., giving circles), family and friends (even if it is embarrassing to ask them), and tapping a home equity line of credit.

 

¨     Womens’ Finances- Women, the majority of U.S. nurses and teachers, have been “beaten down” by COVID-19. As a result, many have stated “I’m out at 62,” so they can collect reduced early Social Security benefits. There is concern, however, as to whether they will be able to live comfortably throughout the remainder of their lives. Using the Rule of 72 with 3% inflation, prices will double in 24 years (e.g., from age 62 to 86). A recent study found that 47% of women cannot afford a $400 emergency expense and 21% use a credit card for emergencies. Another Consumer Action webinar speaker ominously predicted “we will see caravans of homeless women in this country” (a la the movie Nomadland).

 

¨     Working Past Age 70- People should not plan on doing this when they are calculating how much they need to save for retirement. Ambitious plans can go awry. Ageism is a very real thing and those who plan extended careers must absolutely keep their skills and professional contacts up to date so they can provide value to an employer or clients (if self-employed). Two risk factors, besides ageism, are health and ability to work. Benefits of working longer are delayed withdrawals from savings, more time to save money, and increased formula-based pension and Social Security benefits.

 

¨     Getting Started is Hard- Many people don’t invest (or take other actions to improve their personal finances) because they don’t know where and how to start. Financial educators need to remember this and break financial actions down into a series of process steps and offer encouragement along the way. Another financial education tip is to make financial planning activities seem urgent and important. For example, investing is important because it is a proven way to build wealth over time. The #1 pre-requisite for making a change is a sense of urgency.

The Great Re-Evaluation of 2021

We are now 18 months (March 2020- September 2021) into the pandemic. Worse yet, there is STILL no end in sight. Instead of “getting back to some semblance of normal,” we’re hearing a lot about increasing COVID-19 cases, breakthrough infections, booster shots, mask mandates, vaccine hesitancy, and events that are being cancelled (e.g., the 2021 Financial Planning Association conference).

On September 30, I will be doing a free, one-hour webinar for the New Jersey Coalition for Financial Education (NJCFE) about COVID-19 and Your Finances. This webinar will provide an overview of dozens of pandemic-related impacts on American families and action steps that people can take to stabilize or improve their finances.

Topics to be covered in the webinar include inflation, budgeting, taxes, investments, and charitable gifting. Another topic that I will be discussing is “The Great Re-evaluation,” the pandemic-inspired mindset shift that many people have had in the way they view their lifestyle, jobs, relationships, residence location, and more.

COVID-19 prompted a fundamental reset in the lives of many Americans who were freed from pre-pandemic routines, had more time for self-reflection about their dreams and feelings, and began to envision a different future. 

Has it changed your thinking, spending, habits, and plans? 

Below are five key aspects of life that many people have been re-evaluating:

Employment- The “Great Resignation” is underway as people are quitting jobs at a much higher-than-normal rate. In April 2021 alone, 4 million workers walked away from jobs and polls show many more are planning to change employers, and even industries, after 18 months of living a new lifestyle and acquiring new contacts and skills. Many are seeking higher pay, better benefits, shorter commutes, remote work options, flexible work hours, and better overall work-life balance. I can personally name at least a dozen colleagues who recently left long-time employers to pursue new career paths.

Retirement- COVID-19 has cut both ways. For some workers, it crystalized their mortality and the number of “good years” or even “summers” they have left, so they exited the workforce sooner than planned to enjoy a more relaxed lifestyle. Some retired due to concerns about personal safety. Others realized they want to work longer, especially if their job now provides the ability to work from home and flexibility in work hours and location. Unfortunately, as the Center for Retirement Research noted, not everyone can delay their retirement. Black workers and those with less education are less likely to do so.

Health Impacts- From sports stars and Olympians to ordinary people, we are seeing increased attention paid to mental health and overall wellness during a time of stress and uncertainty. This includes a desire for increased life balance and fewer stressful, hard-charging, work days. People are now viewing commuting time, work-related travel, and 60+-hour work weeks through a different “lens” and many do not want to resume this lifestyle. Financial planning industry thought leader Michael Kitces recently wrote about “subtraction” strategies that people can use to simplify stressful lives.

Relationships- Again, COVID-19 has cut both ways. Some people experienced “too much togetherness” during COVID-19 lockdowns and ended less-than-solid relationships. Others reported a new-found closeness with their family and friends that they want to continue going forward. COVID-19 undoubtedly informed numerous decisions about marriages, divorces, and parenthood. Differing viewpoints about mask-wearing, vaccination, and indoor gatherings have also affected relationships.

Spending- More mixed impacts from COVID-19. For some people, COVID-19 inspired a YOLO (you only live once) FOMO (fear of missing out) mentality because it showed that the future is unpredictable and not a given. This may have led to “let’s do (or buy) things while we can” over-spending. Others with lower expenses  (e.g., commuting and child care) as a result of COVID-19 may now have adequate emergency reserves and a thoroughly ingrained savings habit.

Finally, a sobering note of caution. Some people, especially those living on the “financial edge,” have not had the ability to “re-evaluate” their lives. Out of financial necessity, they continue to work, often in public-facing jobs with high COVID-19 transmission potential, or they stay in unsatisfactory, sometimes even abusive, relationships. Some are now facing eviction.

Bottom Line: The ability to “re-evaluate” your job and your lifestyle is a privilege that is not realistically available to everyone. If you have the opportunity to do a post-COVID re-evaluation and re-set of your life, make the most of it!