Since the start of the pandemic, Americans have been on an economic roller coaster with fluctuating interest rates, mass layoffs and soaring inflation. It’s no surprise, then, that about half of non-retired adults say the pandemic has made it harder for them to reach their financial goals, according to the Pew Research Center.
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So how can you best manage your finances in today’s tough economy? GOBankingRates spoke to several financial experts to see how the pandemic has changed their financial advice.
Be careful with easy online spending
When the shutdowns began, in-person shopping declined while online shopping hit new highs. In 2020 alone, e-commerce sales grew by 43%, according to US Census data.
But the ease of shopping online can also make it more tempting to spend, said Tom Siomades, CFA and chief investment officer of AE Wealth Management.
“I think the pandemic has further eroded people’s ability to assess the value and their view of money,” he said. “The pandemic has accelerated everything that happens online. People want stuff now, they pay with electronic money. They no longer save or, even worse, have the discipline to save. They don’t consider cost, only convenience.
While many Americans have increased their spending online, Brian Meiggs, founder of the personal finance site My Millennial Guidesaid the pandemic is also forcing people to take a more hands-on approach to their personal finances.
“The pandemic has highlighted the need to have a budget, build emergency savings and create a financial plan that fits their lifestyle,” he said.
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Timeless Financial Management Principles Still Apply
Christopher Drew, Representative Investment Advisor at Drew Capital Management, believes it’s more important than ever to follow timeless money management principles. With inflation at astonishing levels, Drew encourages his clients to spend less and save more.
“Be more careful about your spending habits due to rising inflation,” he warned.
For some, that may just mean changing what you spend money on. For example, since the pandemic began, Meiggs has shifted his spending focus from material things to his future.
“I started saving more and investing in things that will increase my wealth,” he said. “I’ve also become more aware of my spending and focus on needs rather than wants. Before the pandemic, I used to buy the things I wanted on impulse without thinking about it. whether or not I need something before making a purchase.”
Stay in touch with your financial advisor as the markets evolve
It’s a good idea to work with a financial advisor who stays up to date on the market and understands how economic changes can impact your investments. But it’s not enough to hire an advisor. Be sure to keep in touch with them so they can adjust your investments based on the market and your needs.
“Due to economic factors affecting the market in the current environment – such as interest rate hikes, the war between Russia and Ukraine and a massive spike in inflation – we have had to make adjustments to portfolios as well as asset allocation changes to help reduce overall market volatility,” Drew said.
Focus on saving and investing for the long term
At the start of the pandemic, interest rates hit historic lows. As a result, it was the perfect time to take advantage of short-term loans to purchase real estate or businesses.
Now, however, with interest rates rising rapidly and showing no signs of stopping, experts are advising otherwise. Instead of looking for short-term loans, focus on long-term savings and investments.
“As interest rates rise, businesses and consumers will cut back on spending due to rising borrowing costs,” Meiggs said. “This will mean lower profits for growing companies and stock prices will go down. However, if you are investing for the long term, rising interest rates will not have a significant impact on your portfolio. Instead, focus on saving and diversifying your income.
Reevaluate your priorities if necessary
Since the start of the pandemic, Meiggs has noticed a shift in perspective as many people begin to question what’s most important in life.
“Working from home and spending more time with family has made people reevaluate their priorities,” he said. “The pandemic has also brought about a change in the way we perceive our time and prioritize it. Instead of trading time for money, we now prioritize experiences over things. This change in mindset has led to a change in the way we view and manage our finances. We are now more mindful of our spending and focus on creating memories rather than acquiring things.
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