This Week: May 29th
Read
We did it, the U.S. just set a new record for savings rate…unfortunately it took a pandemic to get us there. COVID-19 has had a huge impact on the economy with over 40 million unemployed and businesses trying to figure out how to stay open. This article outlines how we are at a 33% savings rate and what that means for the economy now, and as we move towards a recovery.
While the economy is the focus of this article, I also want to highlight the fact we just passed 104,000 deaths in the U.S. alone. Let’s all continue to pray for those who have been taken by this virus, those who have lost loved ones, those who are sick, and those working to protect us.
What I took away:
It’s interesting to see how the savings rate has been affected by this period of economic uncertainty compared to other times in our history. Since the Bureau of Economic Analysis started tracking the national savings rate in the 60’s, there have been several economic downturns; market crash of 1987, .com bubble, and the Great Recession. Obviously the fact that we are stuck in our homes and not able to spend like we normally do is a major factor, coupled with the uncertainty of employment status, and more drops in the market…people want to hold on to the money they have.
While consumers do play a big part in what an economic recovery looks like, it should not come at the cost of your financial freedom. There is no need to feel like you are solely responsible for getting the economy going again and must spend your money. Be thoughtful about the money you have been able to save during this time; use it to pay off debt, build an emergency fund, or any other way that is going to help your finances.
While it took a pandemic to get our savings rate to historic levels, I hope we do carry some of this with us. The vast majority of us can do a better job of saving our hard earned money. That does not mean hoard it and not have any fun. It means understanding what is important to you and not wasting money on trivial things.
Watched
This is a video from a film maker on YouTube talking about his approach to personal finance through the lens of a minimalist. He is admittedly not a personal finance expert but, he has some really good insight.
What I took away:
Simplicity. Be thoughtful on how you set up your finances - how many accounts you have, what banks you use, the purpose of each account. Personally, my wife and I have multiple accounts for different purposes and that works for us…but I do love the simplicity of his set up.
It’s easy to get caught up in getting the most value out of every single option, but that can turn into a never ending cycle of research. Find what works best for you and solves whatever problem you are facing and move on.
Use caution when considering a major purchase. Their home purchase was a great example for a couple reasons: 1. They realize they are not in a position to buy a house right now - they understand the weight of that decision and are allowing their finances to dictate when they buy, instead of other external pressures. 2. Planning ahead. They know they want to buy a house at some point, so they are preparing and doing research now so when the time comes they are educated and confident in their decision.
Really the last 2 minutes of the video are so good:
“Not a personal finance expert…I consider myself an expert in my own personal finance” - You don’t have to be an expert on everything, but strive to be an expert with your own finances.
Loud voices in the financial world telling you what to do while another voice is telling you the complete opposite can be confusing. Just remember there are a lot of options out there, it’s about finding what’s right for you!
“Don’t let the fear of doing the wrong thing prevent you from doing anything” - If you are stressed about money, it can be tempting to stay where you are out of fear. By taking action you will slowly get on the other side of whatever financial hurdle you are trying to overcome.
Listened
The Financial Confessions podcast is produced by the folks at The Financial Diet. “TFD” has a great approach to money and makes it very accessible and clear.
What I took away:
We use Mint (a product of Intuit) for our budget and love it! If you are looking for a way to track your monthly spending, Mint is a great option.
A tangible way to save: If you are considering a purchase, set a waiting period - whether that’s 1 day or a week. If you still want the item after the waiting period, then buy the item. I like this idea because it really makes you think before you buy something in the heat of the moment.
The end of the podcast, minute 59:55, where she talks about the “perpetual hamster wheel of having more so you want more you” really stood out to me. The idea of making your life more comfortable day after day and tying it to your happiness and self worth is a recipe for disaster. Focus on your goals and values not related to money.