fbpx
Preparing Your Finances and Budget for a Post-COVID Landscape

Preparing Your Finances and Budget for a Post-COVID Landscape

We have all heard the overused phrase “new normal” too often. Pundits and media types love to tell us that this is a different time, situation, or environment than we have ever seen before. I tend to look skeptically at these prognostications because history has a way of repeating itself. All of that said, we are all finding our footing in the soon-to-be post-Covid lockdown period. It will feel strange to eat in a restaurant or shop in a store without wearing a mask. This will not, however, be a new normal as much as a move toward “back to normal,” not only in our personal and social lives but also in our financial lives. 

Savings Rates on the Rise

We all were forced to adjust our lives and adapt to a Covid world. We all stayed at home more and limited our exposure to populated situations. A silver lining emerged from this very difficult period in our lives by way of our personal savings rates. Personal savings rates in the United States skyrocketed in 2020. The savings rate in 2020 was almost double that of 2019 and more than doubled the respective rates of 2016 and 2017. This was the direct result of our travel and discretionary spending being greatly restricted; therefore, most people changed their spending habits without necessarily trying to change their spending habits. We didn’t intentionally tighten our budgets. More so, our budgets were tightened for us. For this reason, we need to be cognizant of how our budgets are likely to change again in the post-Covid world. 

In the chart above, 2020 became one of only two years since 2000 that Americans’ personal savings rate eclipsed 10%. Click here for the interactive chart. Source: Statista.com

Pitfalls on the Move Back To Normal

Our economy is emerging from the past 15 months and the US consumer appears ready to spend again. The travel statistics in the U.S., while still low, are strongly rebounding, with nearly nine in 10 Americans preparing to travel in the next six months. Bars and restaurants are also seeing foot traffic slowing moving back to pre-Covid levels. All of this means one thing for our finances – plan or deal with the consequences. We will likely experience myriad influences over the coming months, including the lack of a spending budget and the desire to do everything we couldn’t during Covid – all at once. These can cause major problems to our monthly budget. We should anticipate an increase in our discretionary spending and plan for it. Make a conscious decision to set a monthly budget for spending on dining out, entertainment, and travel.

We should also be aware of the desire to make up for the lost time. For many of us, we haven’t seen a concert, attended a live event, or traveled on vacation in roughly a year and a half. We should fight the urge to make up for that in the next six months. Spread out those more costly, splurge-type purchases over the next year or two. It is important to establish a dedicated travel line item into our budget. This will make it much easier to control those costs. 

Assess Your Financial Situation 

Your financial life is in a different place than it was at the beginning of 2020. Many people have experienced a job change or an increased balance in their cash reserves. Now is the time to re-examine your financial goals and meet with your financial advisor. You may have a former 401k to roll over or room in your existing employer-sponsored retirement plan for additional contributions. The investment markets are in a significantly different place than they were 15 months ago, as well. Have you rebalanced your investment allocation since the pandemic started? Investors should determine if their risk profile has changed. Life events that are the size, depth, and breadth of Covid-19 change us individually and can easily have an impact on our view of risk. For all of these reasons and many more, you should book an appointment with your financial advisor and update your financial plan. If you do not have a financial plan, feel free to reach out to Walkner Condon.

Nate Condon, Financial Advisor

Creating a Culture of Philanthropy

Creating a Culture of Philanthropy

New to the Walkner Condon team, I come from 10 years of fundraising for non-profit organizations. Whether it was promoting wildlife conservation or helping to eradicate preventable diseases (which feels especially poignant these days), my career in charitable giving has cemented my understanding of the importance of philanthropy.

I have had the privilege of working for some highly reputable organizations, but I have also had the privilege of working with a highly diverse swath of donors and volunteers – ages, nationalities, and socioeconomic backgrounds. 

Taking some time now to reflect on my tenure in charitable giving, I have noticed a common thread among those generous donors and volunteers. No matter the size or shape of their gifts, they subscribe to a culture of philanthropy. Somewhere along the way, the importance of giving back was impressed upon them. Perhaps their families have supported the same causes for years, or perhaps they themselves were beneficiaries of gifts that changed their lives. Regardless, experiencing a culture of philanthropy instilled the importance of exploring the many ways in which we can all make the world a better place.

But where to start? Depending on the charity, gifts can be made in several different ways – for example, outright cash, monthly sustaining gifts, gifts of appreciated assets such as stocks, IRA qualified charitable distributions (QCDs), as well as giving posthumously from your estate. But beyond that, giving can also take the form of volunteering and advocacy for your favorite organization(s). Is there a cause that you find important or an organization that intrigues you? Research it! Visit that charity’s website, send an inquiry to their volunteer office, or do the really fun task of reading their annual reports. 

Some families have established family foundations that allow and ensure their culture of philanthropy transcends generations. But for the majority, it can be as simple as taking the small step of making room in our monthly or annual budget for this purpose. Perhaps it’s a monthly contribution to your favorite cause. Or perhaps you choose 2-3 charities to give to each December. And even beyond financial support, consider the other resources you have to offer (time, talent, etc.).

Deciding where and what to give can be a solo decision – or one that you make together as a family. We know our kids are watching and learning from us as we talk about money, so why not include them in the discussion? Instilling this culture of giving back at an early age can be critical and lead to a legacy of giving.

If you ever think a gift is too small to make a difference, I would challenge you to reconsider. Think about that “small” gift combined with hundreds of other families doing the same thing. That “small” gift now becomes something substantial. And not to mention, that act of giving can turn into a habit or inspire others to join you, especially those in your own circles of influence.

We all know how it feels when asked to contribute to a friend or family member’s fundraiser for this or that. All are important and worthy to support, but might be difficult to prioritize. So maybe create some space in your budget for those individual fundraisers that pop up. It may even give you a sense of security knowing you can be there for those who need you when they need you. Plus, you are demonstrating to your children (or other impressionable connections) that you can care passionately about something and actually do something about it.

In the world we live today, there is no shortage of worthy causes. Just remember to do your research and ensure you understand where your money is going. Charity Watch and Charity Navigator are two great places to start.

This is one of the things I’m most excited about in joining the Walkner Condon team: learning the money management side of this equation. After all, thanks to smart financial planning, your family can create space for giving back and making your own brand of difference in the world.

While I leave behind a career of soliciting, processing, and stewarding donations, I look forward to helping our clients achieve their goals, whether that includes charitable giving or not.

But if you think about it, the simple act of giving once and talking about it with your children, grandchildren, nieces, or nephews, could be the inspiration and catalyst for creating your family’s culture of philanthropy.

Polly Price

The Legacy of Yale University’s David Swensen and a Critical Investing Insight

The Legacy of Yale University’s David Swensen and a Critical Investing Insight

As many of our clients know, I took a slightly different path to financial advising than most, starting as I did in the groves of academia. I found the path to Wall Street that many of my University of Chicago friends and classmates took off-putting (I viewed American Psycho to be a cautionary tale, not something to be emulated). But perhaps because I was raised by two accountants (I’ve often told how I remember talking about the 1987 Market Crash in detail at the dinner table), I always kept an interest in finance and Wall Street. Ultimately, as I transitioned into financial management, one of the models I took for someone who could keep a good ethical center and still work efficiently for the people they serve was David Swensen, who died on May 8.

Swensen managed Yale’s endowment from 1986 until his death (actually taking a pay cut to begin running it and also – while well-compensated by academic standards – could’ve made much more running his own hedge fund, for example). A Wisconsin native, Swensen revolutionized the staid world of endowment investing. His book Pioneering Portfolio Management laid out the math and theory of his evolution of endowment management. In simpler terms, he discovered he could take advantage of the unique characteristics of endowment investing (its nearly unlimited time horizon and its unconstrained nature) to expand Yale’s investments into different markets. (Yale owns Timberland, for instance).

Over the years, various high-cost products have popped up as “Endowment” Funds – trying to indirectly trade on the cachet of the model and promise “Yale-like returns.” Swensen addressed whether individuals could follow the “Yale model” with the publication of his 2005 personal investing book Unconventional Success: A Fundamental Approach to Personal Investment. Swensen made clear that this “endowment for the individual” approach was impossible. With the forthrightness that made him a controversial figure, he said that he sat down to write a book so that personal investors could do what he did at Yale, but for a variety of reasons – a factor of not having his resources, time and power, along with Wall Street greed – such an approach wasn’t feasible for individuals. Instead, he laid out a smart, low-cost, well-diversified approach to money management that aimed to help investors take advantage of their personal situation to manage their wealth. 

More than any particular investment model or asset class, this is the lesson I’ve taken from David Swensen and one I hope we share with our clients: all of us have investing advantages in one way or another – we just need to find a plan to fit those advantages to our lives.

Keith Poniewaz, Ph.D