Well sort of. Yes, we are approaching the end of a period in history that many of us will want to forget. The reduction in our freedoms is something we will always remember as a hardship. Many of us will also have lost loved one’s way too early.
There will after all this be a new normal for most of us. The changes will be stark. Fewer hours commuting each week, more use of the dreaded technology, new forms of relationships. My hope is that we keep the good changes and ditch the bad stuff we felt obligated to do before.
The next period is going to be interesting. As the time of COVID shortens (WE HOPE!) what are we going to prepare for. What financial lessons have we learned from living in the pandemic that will be important after the virus is under control.
Lesson 1. For a good many people, they have learned that they can survive on a lot lower expenditure than they thought. I am not talking about income. I am suggesting that if we have no where to make discretionary expenditures we do not. Some of you will view this as a good thing. In fact, if funds on deposit in Ireland (€140 bn) is a measure of this lack of expenditure it demonstrates people’s capacity to save if they choose to do so.
Lesson 2. If we know we can survive on less so does our employer. It will not be long before many employers seek to capture some of this saving through reduced wages. If you remove the cost of travel from your regular expenditure there is a real saving. Assume a 15km car commute with fuel consumption at 12.4 km per litre at €1.36 per litre cost. This results in an annual cost of €756 and thus a saving of same if you stop commuting. Eating at home as opposed to buying a sandwich, bag of Tayto’s and a drink and a coffee per day also results in a saving. Assuming sandwich Tayto’s and drink equals €6 and the coffee is €2.50. Also, assuming the cost of these items at home is 30% of retail you would save €5.60 per day or €1,288 per annum. I have assumed that you work 46 weeks a year. These are just examples, but combined they are €2,044 per annum after tax. Using an average marginal tax rate of 26% that is nearly €2,600 per annum of salary. My question is will you work for less if you do not have these expenditures?
Lesson 3. The unexpected happens. We are at the one-year anniversary of the first case of COVID in Ireland. Before February Last year no one would have predicted a complete halting of the economy. Clearly there have been winners and losers. In my experience people that lost their jobs or where furloughed but who had contingency funds set aside for periods of financial stress have manged better than those who did not. So, my question now is what should we be doing to prepare for the next great unexpected thing. It could be losing your employment, or it could be suffering a serious illness. (Other than COVID) These things can and should be on people’s radar. Failing to plan is planning to fail, or certainly having a period of financial and mental stress.
Lesson 4. Today was the first day back at school for many pupils. I live on a school run and boy oh boy what happened to the traffic. This tells me that it will be very easy to fall back into our old ways. We have gained a great deal of time, what have we done with it. If you are not commuting for 2 hours a day on your own time what are you doing. Exercise? Sleeping longer? Can you get a real benefit from this extra time? Most people will answer yes. They have a better quality of life. Is this not worth defending? Can we avoid slipping back into the habits of old? How do we know what we can afford and what we need to earn to have the lifestyle we want?
Perhaps as we head towards the end of the COVID era we should really pause and plan for our financial futures. We have the time now before it gets manic again. We know what can happen if we have no contingency. We have seen a different lifestyle and have an experience of what is possible.
Talk to a financial planner. They will help you get financially organised. They will provide an objective insight into financial decisions so you can avoid emotional traps. They will work to point out life’s transitions and changes so you can be financially prepared. They will create an action plan to help you navigate future periods of financial stress. They will bring their knowledge and experience of helping many people with similar needs and objectives. Where you need assistance or additional expertise, they will use their extensive network to make the right introduction for you. Lastly, they will help you follow through on your commitments by working with you to prioritize your goals and objectives. They will accompany you on your financial journey regularly review your progress and making suggested changes as required.
