We’ve been doing a lot of dishes. So many that our dishwasher hit the skids in August. After reviewing our budget and the age of the dishwasher, we decided to replace it. Then the 8-plus-year-old washing machine broke this week. Mr. Stevens’ first comment? “There goes the budget…”
People around the world are tightening their belts during the pandemic, due to salary cuts, job losses, or unexpected expenses. Twenty-five percent of American households received some sort of financial help in July. Four million Americans saw their salaries cut. Both Mr. Stevens and I cut or deferred compensation while sorting out what impact the pandemic would have on our respective businesses. (Then our oldest child made a big decision to change high schools, hence an even greater need for that budget.)
Financial Wellbeing Trends
Given the economic pain of COVID, I found the recent news from the Federal Reserve about financial wellbeing surprising. Seventy-seven percent of Americans said they were doing “at least okay” in July. That was up 5% since April, but also up by 2% from October 2019. A key metric for financial wellbeing is whether someone would have the cash to cover a $400 unexpected emergency expense. Nearly 70% of households say they could, up 6% from October 2019.
So, what is going on? Economists theorize that it is a confluence of factors. They think government interventions—like payroll protection, enhanced unemployment benefits, stimulus payments—helped. They note that spending plunged in the early months of the pandemic. JP Morgan Chase reported that credit card spending was down over 40%. A slight majority of American households own stocks and after a terrible Q1, the market is up 20%. But the most interesting theory is that Americans’ attitudes about their budget and money have changed. Charles Schwab’s modern wealth survey shows that Americans believe it takes 30% less in assets to be comfortable now than they did in January. We are prioritizing relationships now much higher than money. We are planning and saving more.
The Charles Schwab survey reveals most people—even those who say they are comfortable now—are experiencing significant uncertainty and stress about their financial future. This is where leaders can help.
At the Government Level
Supporting the unemployed and businesses affected by the pandemic needs to continue to be a top priority. It was effective in the early days, but the pandemic continues to cause unprecedented disruption.
I guarantee that most of your workforce is experiencing anxiety. You can address this on several fronts. First, transparency and communication about how your business is doing, even if it is suffering, gives employees a sense of control. Second, offer financial wellness benefits, and encourage your teams to use these tools to improve their budgeting practice, grow their emergency savings, and to work with financial counselors. Third, remember that 23% of our nation (and likely more if benefits aren’t extended) is really struggling. Continuing to offer volunteer and financial support to community organizations like food banks and housing assistance is critical and helping others improves employee resilience.
Resetting our Priorities
If one enduring legacy of this pandemic is that we continue to think it takes less to be comfortable and focus on relationships, that could be positive on many fronts, from environmental to social to mental health. It isn’t how anyone would have chosen to have a big reset on priorities or their budget, but it may have been one we needed.
Quote of the Week: So often in life, things that you regard as an impediment turn out to be great, good fortune.Ruth Bader Ginsburg
Author’s Note: Thank you RBG. I could not do what I do, had you not done what you did. I will miss you immensely.