The pandemic changed everything, even our relationship with money.
Having a healthy relationship with money comes easier to some than others. Some people might coast paycheck to paycheck without a savings account, while others budget diligently, ensuring each penny is accounted for.
While there is no perfect relationship between a person and their wallet, there is no denying that the pandemic flipped spending on its head. For many, that led to an overhaul on how they spent money, allowing for new patterns and habits that maximize their pocketbooks, even when confronting inflation head-on.
Personal Income is on the Rise
Although inflation has many Americans concerned for the next few months, there is good news: personal income is actually increasing. According to estimates released by the Bureau of Economic Analysis, personal income increased by .02%, which amounts to $47 billion. Similarly, disposable personal income (DPI) increased by .02%, amounting to $37.6 billion.
Wage growth is also on the rise. Hourly earnings have seen a 5.2% increase since last year. Meanwhile, the unemployment rate has finally returned to pre-pandemic levels.
These numbers suggest some degree of hope for a period plagued by uncertainty.
Money & Me
To better understand how consumers’ relationship with money has changed over the past two years, we spoke with Americans across all walks of life.
Susan Lee wears many hats. She is a lifestyle content creator. She’s also an active duty military spouse who worked remotely for a US-based non-profit while she and her husband were stationed in Germany. “Before the pandemic, I managed my personal finances by budgeting,” Lee told us. “I used Mint and my own Excel spreadsheet,” she says.
She realized budgeting and saving didn’t help her plan for long-term wealth, so she traded Mint for Personal Capital, a wealth management tool. “This mindset shift from budgeting to wealth management was a lightbulb moment,” says Lee.
Lee was able to channel her interests into entrepreneurship. Today she focuses on building up her business. “We’re creating diverse streams of income to build generational wealth,” she says.
Beyond Temporary Satisfaction
“This state of increased isolation allowed me to sit back and think about my money in a new way,” says Michael Campbell, the co-owner of Throw Deep Publishing.
In addition to owning his own company, Campbell freelances on the side. Before the pandemic, he would spend a good portion of his money on what he classifies as “wants” versus “needs,” such as material items or going out to eat. When the pandemic stopped that way of life, Campbell realized he was enjoying the results. “I liked seeing the number in my bank account grow as opposed to being spent on items that would give me some temporary satisfaction but would later become mostly obsolete,” he says.
For Sara Alshamsi, founder and COO of Big Heart Toys, the pandemic challenged her mindset when it came to spending. “Before 2020, I was most concerned with making sure my family had what they wanted in the present moment,” she says.
When she realized the pandemic would have lasting ramifications, she knew she had to make a change. “Today, we choose lasting stability over luxury,” says Alshamsi. The next crisis could be lurking in the near future, so she wants to ensure her family is protected from what she calls “potentially tumultuous tomorrows.”
Chasing the American Dream
Veronica Hanson had everything: a house in the suburbs with a white picket fence, an expensive private school for her children, and luxury vacations to Paris, Milan, and Cabo. “It was the typical life people strive for,” Hanson told us.
The pandemic changed her relationship with money because Hanson realized she could enjoy life just as much if she stopped chasing the American Dream. “When the pandemic hit, we switched our dream to experiences over living up to people’s expectations,” she says.
Today, Hanson and her family live a full-time “slowmad” life, living out of six suitcases and traveling the world. They rent out their perfect suburban home as an Airbnb in addition to working full-time jobs. After booking a one-way ticket to the Dominican Republic, Hanson turned a vacation into a way of life. This was followed by trips to New York, Paris, and even a month in Egypt.
“Currently, we are in Tokyo with a one-year lease with the kids back in a regular school,” says Hanson. She is careful to stress that she works hard in her life and isn’t independently wealthy. “It turns out that leaving our car payments, absurdly high healthcare costs, and accumulation lifestyle behind is actually cheaper,” she told us.
Hope is on the Horizon
An air of uncertainty and negativity may pervade the news cycle, but consumers are doing everything possible to remain confident. Consumers are most worried about rising prices and inflation, according to a report by McKinsey and Company.
This study found that “despite inflationary pressures, US consumers have twice as much in cash savings as they did before the Covid-19 pandemic.” Additionally, some spending categories have increased, including retail apparel, travel, restaurants, and pet supplies.
The study speaks to the resiliency of consumers and could make for a more confident and fertile tomorrow.
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This article was produced and syndicated by Wealth of Geeks.