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Financial Life in a Post-Pandemic World

While it’s difficult to visualize what our post-pandemic world will look like, there is data and insight that we can lean on to get a clearer picture of what to expect regarding our careers and finances.

June 7, 2021

If hindsight is 20/20, pre-pandemic life looks a heck of a lot different from the life most of us have been experiencing this past year and a half. We’re all in such different places in our lives, and in many cases, our priorities and perspectives shifted as we lived through such a unique period in time. It’s difficult to visualize what our post-pandemic world will look like, but there is data and insight that we can lean on to get a clearer picture of what to expect regarding our careers and finances.  

Spending May Return Sooner Rather Than Later

For so many, the coronavirus had a big impact on their financial lives due to a mix of job loss, increased employment benefits, stimulus checks, and Paycheck Protection Program loans. One positive financial element that social distancing and travel bans introduced was the opportunity to spend less and save more. Happy hours, amusement parks, and vacations were all replaced with the more — potentially — cost-effective activity of staying home. 

The Brookings Institution expects spending to bounce back to pre-pandemic levels by 2022 for those with middle to high incomes if their household wasn’t too impacted financially by the pandemic. However, when the pandemic is over, those who lost their jobs or faced other financial challenges and who have lower income levels will likely spend less than they did before the pandemic because of recent financial strain. With many companies opting to move online and increase their automated operations, experts at The Brookings Institution do worry that there may be a slower recovery of jobs in consumer services.

Savings Rates May Slow a Bit

Instead of spending, many Americans have been saving their money. The consumers that didn’t need stimulus payments to replace lost income were able to put that money into savings. On average, US households saved 36.4% of their first stimulus payment, and when the New York Fed surveyed them in the summer of 2021 (before the second stimulus payment was released) survey respondents reported planning to save 45% of their second payment. There’s a good chance these consumers will spend some of their cash reserves once there are more places available to spend their money such as bars, restaurants, and movie theaters. 

The Working World Could Stay Remote

Where we work was one of the biggest changes of 2020, and many employees who didn’t typically work from home left their offices to join the remote workforce. McKinsey & Company is predicting that remote work may be here to stay and that more than 20% of workers are capable of working from home for three to five days a week just as effectively as they could work from an office. A more permanent shift to remote work, even if it’s only a few days a week, could profoundly impact traffic, the environment, public transportation, spending, and urban economies. 

Unfortunately, not all workers can benefit from the perk of doing their jobs from the comfort of their own homes. Over half of the US workforce doesn't have the opportunity to work from home, as they need to be on-site to work with machinery, handle inventory, or provide in-person services (such as in the medical or delivery industry). 

The shift to remote work may be agreeing with many workers. A recent survey from The Conference Board found that in 2020, job satisfaction reached a record high, despite the added stress that the pandemic threw at workers. In 2010, job satisfaction reached its lowest point ever at 42.6%, but in 2020 reached 56.9%, which was the highest level of satisfaction seen in 20 years. Employee engagement also rose last year, with workers reporting their engagement at 53.2% in November 2019, and 54.3% in November 2020.

Unemployment Rates are Lowering

Rampant job loss throughout 2020 caused an understandable amount of panic among workers. As of April 2020, the US saw its highest unemployment levels since 1948, with a rate of 14.8%. Luckily, employment conditions have improved and unemployment rates dropped to just 6.2% as of February 2021. The Congressional Budget Office is optimistic that these numbers will continue to drop to 5% in 2022 and 4.7% in 2023. With the increase in remote work opportunities, many Americans may find they can widen their job search past their local job market and find more employment opportunities than they normally would have pre-pandemic. 

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Debt May Continue to Shrink

The post-pandemic world may be a little lighter on credit card debt than it was in 2019. A study by Experian found that, on average, credit card debt declined by more than 14% in 2020. Debt from home improvement lines of credit (HELOCs) also dropped last year. Overall, debt levels in 2020 barely surpassed the amount of debt in 2019, with a growth rate of just 0.3%, although the average debt balance did surpass 2010 levels when debt amounts peaked after the Great Recession.

Considering how high unemployment rates were throughout the pandemic, some may be surprised to see that more consumers didn’t grow their debt in 2020. One likely reason Americans were able to avoid diving deeper into debt is the aid provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Many adult Americans were given one-time payments of $1,200 in the first round of relief and increased unemployment benefits. Student loan repayments were also temporarily suspended for federal student loan borrowers. All of these provided much-needed financial relief to consumers. In December 2020 and March 2021, more relief packages were released, and access to some of the initial assistance programs was extended, providing additional stimulus funds to Americans. 

Better Credit Scores on the Horizon?

With average credit card debt amounts on the decline, consumers have a unique opportunity to enter the post-pandemic world with higher credit scores. Because credit card debt dropped in 2020 by 9% from 2019, many consumers likely improved their credit utilization rates and as a result, may have boosted their credit scores. Experian found that the average FICO® Score in 2020 for consumers with credit balances was 735, which is considered to be a good credit score.  

Despite the many struggles 2020 had in store for us, it was the first year since 2012 that credit card debt did not increase. Hopefully, this is a trend that will continue for many years to come!

 

Are you still struggling to pay down your credit card debt? Learn more about how Tally can help you face the challenges head-on — to help you reach your goals faster.