How the epidemic altered personal finance habits

The Great Resignation, also known as the Big Quit, was a topic that received a lot of attention in the second part of last year. Around the time of the COVID-19 epidemic, there was a tendency that led to a significant number of people quitting their professions willingly, at least anecdotally. The Big Quit was controversial, not least because some of the coverage of the movement gave the impression that many of these individuals had made a lifelong decision to leave the workforce.

However, the factual data, notably in the U.S., indicates that the labor force participation rate, which fell at the start of 2020, actually rebounded very rapidly. Workers who were almost ready to retire were among them. Which implies that individuals weren't truly abandoning their jobs completely, but were simply changing them. In many cases, people left occupations that paid well but demanded long hours in favor of ones that may have paid less but allowed them more control over their lives. In other words, it was more like the Great Reshuffle than the Great Resignation.

That is unquestionably the conclusion Jill Schlesinger came to. Schlesinger works for CBS News as a business analyst and licensed financial planner. The Great Money Reset, a new book she wrote, is based on her conversations with callers to her personal finance podcast, Jill on Money. Many of the callers were thinking of making their own Big Quit, but were unsure of their abilities or the best course of action.

Schlesinger claims that while inquiries about changing employment to improve work-life balance aren't unheard of in the personal finance industry, they significantly increased during the epidemic. And she claims it is only the first of several significant shifts that will have an impact on the future of personal finance.

People who contacted her program during the pandemic wanted greater control over their schedules and working environments, she claims. Many people came to the conclusion that they wanted to work less or differently, have more flexibility in their professions, work at a less stressful position, or switch to a new career with the benefit of time and the calm of the epidemic. They may not necessarily want to give up life's conveniences, but they are prepared to make at least some financial sacrifices to do so.

The statistics are not everything

In the area of personal finance, financial sacrifice is something you don't hear about very often. This is due to the fact that most personal financial experts and planners concentrate on building up assets with a long-term time horizon in mind: retirement. The idea of financial sacrifice doesn't really belong in that culture. Schlesinger thinks that has altered because of the epidemic, which has made investors painfully aware that they could not live to retire and that it's a good idea to consider how to enjoy part of that money now. Schlesinger asserts that in order to take it into account throughout the financial planning process, advisers will need to get to know their customers better.

Many financial planners find it challenging because they don't like to discuss the emotional issues, according to Schlesinger. Of course, the greatest and most costly planners view their customers as complex individuals with a wide range of needs and complicated lifestyles. However, the majority of financial services are designed to treat humans as mere widgets with predetermined life spans and retirement ages. The human aspect doesn't have much room there. Before the pandemic, according to Schlesinger, reputable financial advisors were already moving away from that strategy.

They understand that you can't simply offer a customer a list and ask them to fill out the assets, liabilities, income, and spending, according to Schlesinger. You need to educate yourself on who they are, and the epidemic has quickened this pattern.

The reserve fund is the most crucial component

Before the epidemic, according to Schlesinger, she would provide folks some very conventional financial advice. She would begin by describing the three pillars of personal finance to them.

"I would say to people, you're just starting out. Here's what you have to do: You need an emergency reserve fund, you need to pay off your debt, and you need to try to put money into retirement. And I would often give those things equal weight."

Of course, everyone recognized the benefits of debt repayment and retirement planning. The reserve for unexpected events? Selling that was difficult.

How can you advise people to keep six to twelve months of living costs in an account that is yielding no interest? There was actually 0% interest throughout the epidemic and the early years, she claims. However, the epidemic highlighted the need of having a financial safety net. The folks who had emergency money, extra funds they could access, went through the epidemic in a completely different way than others who were reliant on stimulus cheques and prolonged jobless benefits.

She claims that while she still promotes the three pillars, the emergency fund is now given far more focus. Since the epidemic, more individuals are aware of the need of having an emergency fund and reliable access to money.

Estate planning is a hot topic right now

Talking about the final goal is typically the most difficult portion of talks for financial advisers. All day long, people are glad to talk about retiring. They're looking forward to a nice time when they can travel, visit family, and accomplish all they've put off doing for the past forty years. However, what about discussing what happens to their possessions and money once they pass away? Before the epidemic, nobody ever wanted to discuss it. Now they do.

Schlesinger claims she no longer has to argue with them about obtaining estate planning. It has been an interesting transition.

According to Schlesinger, COVID-19 forced a lot of people to prioritize thinking about their end-of-life options. One caller, who described a fight over a family company, gave her a particularly upsetting incident that she heard. "Someone died and there was a small business involved and there was no instruction. Like, 'what are we doing with this business? Well, dad would've wanted us to keep it, but mom really needs the money.'"

The absence of instructions from the deceased parent led to a family argument. Probably not what the parents intended to do with their legacy. And certainly not what the bereaved family members want.

Schlesinger claims that everyone knows someone who has a horrific estate experience. The good news is that they reflected on that experience. They now want to talk about estate planning. But because they are difficult talks that demand difficult decisions, Schlesinger says the current difficulty is instigating her clients to really carry out their plans.

The triggers are different now

Of course, it wasn't uncommon for individuals to make significant adjustments in their life prior to the epidemic, but according to Schlesinger, it wasn't all that frequent. The majority of persons made an effort to adhere to a career path and anticipated retirement trajectory. Only a few significant life events might often cause someone to deviate from such a course. The two major triggers, according to her, were divorce and death, but the epidemic brought a lot more triggers to light: loneliness, negative work experiences, and mental health.

She observes that suddenly, many of the choices we took in order to achieve a distant financial objective didn't seem to make sense in that context. "You're living this very bare, stripped down life, and you're with your thoughts, and you're hearing about terrible things and it's really scary. And maybe that's the moment you say, 'why do I live a thousand miles away from my parents? Why have I chosen to work so hard that actually I'm not sure I really like my job; but I know I really love my kids, and I don't really think I want to work this way anymore.'

Fear is the main obstacle to change, even when it seems like the right decision. But in Schlesinger's opinion, a lot of individuals had to undergo transformation as a result of the epidemic. They had to confront such anxieties.

"I just was so overwhelmed by the number of people who were fearful. But who, once that fear started to dissipate, really saw opportunity amid all this chaos. And I'm not talking about market opportunity, I'm talking about life opportunity. What is it that I really think I wanna do?"

She claims that financial planners and personal finance experts will need to accept the reality that, in a peculiar sense, the pandemic made individuals feel they needed to take charge of their life and speak for their most pressing needs and goals. It's now OK to consider your objectives for your work, your financial plans for retirement, and everything else, and ask, "What about me?" Where does my present-day joy fit into all of this?

Schlesinger is aware of the stakes because she has already made significant, audacious changes in her own life, giving up a successful position as a financial planner to become a writer, journalist, and podcaster. But what drove home to her the significance of knowing your true motives for making changes in your life was a friend of hers named Maureen. Maureen was diagnosed with a very fatal disease and she had a four month dreadful sickness before she passed away on November 30th.

"Everyone has a momentous event that shakes up your life. Everybody does. And you feel the stress. You feel emotions I think even in myself as I went through that event with her, my own ability to understand how the choices we make matter, was amplified. And what I can tell you is that when you have the ability to plan in advance and use that to open up pathways for yourself, it's really beneficial."

Relax a little bit

As long as markets have been, there have been crazy investing techniques, but the epidemic coincided with some of the strangest, such as the rise of meme stocks and the crypto frenzy. Schlesinger believes that this was largely caused by the fact that individuals were locked down and given little to do while a lot of money was moving through the system.

"When I say a lot of money sloshing around the system, remember that we had trillions of dollars of excess savings that built up. Mostly that came from the upper, highest net worth people, but a lot of people were knowledge workers working at home who got stimulus checks and had a lot of time to futz around and had a few bucks in their accounts."

The groups that supported this type of trading, according to her, were not new, but they grew significantly during the epidemic, and they are probably going to disappear once COVID and its versions go. They persist nevertheless. It's okay that way. It's also OK to spend some time on the subreddit of your choosing and occasionally ride a meme stock or cryptocurrency asset wave. Providing you act appropriately.

Schlesinger claims she's not fundamentally against people taking flyers. Have fun, but don't endanger the farm in the process. Have fun and admit you invested 5% of the overall portfolio in some crazy item.

In other words, personal finance doesn't have to be limited to tax preparation, estate planning, income optimization, and asset allocation. If you want, it may also be enjoyable. That new guideline is one that everyone can agree to.