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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

Can I Buy Life Insurance as an Expat Post-COVID?

Can I Buy Life Insurance as an Expat Post-COVID?

A crucial part of financial planning for many families is constructing an effective insurance solution to ensure that their long-term goals can be met, even in the tragic case of an unexpected death. However, as we’ve mentioned in a previous blog, such solutions are often complicated by living abroad, particularly when it comes to underwriting insurance.

As a firm, we do not sell insurance, but we do work with a variety of brokers to discuss insurance options for our clients, and all have indicated that right now, insurance companies are having a harder time pricing the risk of life insurance for their clients in a post-COVID world– particularly where those clients have international exposures.  

Before examining the expat specifics, one should note that this has changed insurance not just for Americans abroad, but also for Americans in the United States. Insurance is – essentially –  math and actuarial tables. Insurance companies using demographics, general country mortality, health and other factors, calculate your expected life expectancy based on actuarial tables in order to calculate your monthly premium in a way that will ensure the insurance company does not go out of business. Unfortunately, the inputs for general country mortality and “other factors” have been skewed by the global pandemic and currently insurance companies may not necessarily “trust” their own actuarial tables. Consequently, the insurance market may tighten as insurance companies either charge more to protect themselves against an unexpected and unquantifiable risk, or simply limit the policies they are underwriting or issuing.

In the past, many insurance companies were happy to underwrite Americans abroad in certain cases: for instance, they were able to come to the United States to submit to the policy health exam or could physically take delivery of the policy in the United States. As a result of the underwriting policies changes in the wake of COVID-19, many insurers may not be as worried about the expat angle than the issues of travel and generalized risks such as increased exposure to viruses or other communicable diseases. Consequently, we likely will see a drop in the number of companies who are willing to issue policies to Americans outside of the United States (particularly whole life policies) along with an increase in costs and restrictions (sometimes underwriting policies will require the insured to stay in the United States longer or not travel for a defined period of time).  

Unfortunately, there aren’t easy solutions to these problems at the moment. The general principles from a financial planning perspective remain the same and at the heart of our decision making process is weighing the needs for insurance versus the costs both in terms of health and any additional “hoops” required to obtain a policy. Additionally, we find that working with a broker that can quote a variety of companies rather than just a select few (or only one!) is very important, especially for expats. Ultimately, like so many things in our post-COVID world, we must wait and see, proceed cautiously, and be creative in our solutions.

Keith Poniewaz