Let me start off this month’s newsletter by wishing all of you a very safe and healthy summer season. A short four months ago I was writing about how Covid was not just going to be a passing news event, and how 2020 was going to be an unusual year. I understated that prediction. 2020’s effects on society has gone well beyond our physical health and our wallets.
I am always an optimist first, and I believe good things will come from the changes we are seeing. 2020 will prove to be historic, but hopefully it will leave a positive imprint in the history books. Whatever changes may come, my hope is that they will be seen universally as changes for the better. At the same time I hope that the changes will allow us to ingratiate ourselves back into the comforts of the lifestyles we miss, and not ‘a new normal’.
If I may be frank, I’m not a fan of the term ‘a new normal’. First, I do not like the negative image it projects. One in which our day to day way of being will need to adjust to a permanent form of social distancing, face masks and social bubbles. Or that society will forever be entrenched in political hand wringing and finger pointing.
I trust that once solutions are created and/or agreed upon that our short term memories will push aside the angst we currently feel and we will go back to life as we knew it. Hopefully, with lessons learned.
In my opinion, there is no ‘new normal’. There isn’t even a current normal. There is just what is happening right now. Our job is to figure out how to best deal with any current situation. Over time we will all conveniently forget how bad the world seemed and how much we worried about changes (or lack there of). Humanity always seems to forget that in most cases, when given enough time, change ends up being for the better. Worrying about possible alterations to our world is futile when our ingrained cave man instincts allow us to mentally adapt to any situation. Our best course of action is to figure out what we can do with our current set tools and keep moving forward.
From a financial perspective, as a Financial Planner, I take possible ‘change’ with a voracious positive interest. Financial planning, when done right, is straight forward, simple and lacking excitement. Any chance to add a little variety to the process is taken with great interest. I always enjoy pouring over information regarding legislative and IRS changes. Exciting, I know.
As Covid-19 has progressed, and society makes the necessary adjustments to keep life moving along, I have develop a curiosity about what changes will need to be made to financial planning and goal development. While nothing is a guarantee, I do have both good and bad theories. Here are a couple to share.
The current pandemic came at a very convenient time in human history.
Technological advances have made it much easier to lead your life at a time when you need to be stationary. The internet and online services have allowed the world to be brought to us. Most importantly for most, our work and our children’s schooling can always be nearby.
While still rough around the edges, distance learning was proven somewhat viable as schools shuttered in March. While not every child was equally equipped, distance learning provided an option to continue education, and also provides an option for parents who will not be ready to send their kids back to school in the fall.
There is no reason to believe this is just a fad, and we should anticipate that technology will be sculpted to make distant learning even more effective. And with this change will bring about additional options for collegiate planning and education funding.
Distance learning has the potential to expand higher education options and may eliminate collegiate expenses related to travel, housing, dining and other items which can represent 20% or more of total costs. The reduction in costs and increased options will expand the pool of individuals that can make higher education an achievable goal. Simultaneously the changes will make college savings less of a burden. This will lead to a butterfly effect which will allow people to earmark more money towards other goals, making achieving multiple financial goals more realistic.
Conversely, I theorize that technological benefits may not all be good. Working from home has been a topic of debate in the workplace for quite some time. There are companies which have always required in office work only, and more experimental models which have been flexible well before this pandemic. With distance working a must for some, companies are learning to cope while continuing to thrive. I am curious to see what develops as companies’ management discover the cost benefits of a work at home structure.
Working from home will save commuting dollars, not to mention environmental benefits. However, some companies are already offering stay at home options, which are coming with a salary adjustment (downwards). Will a new culture of stay-at-home work options lead to the first ever period of salary deflation?
And with that theory, we must again look at the butterfly effect. A decrease in income will not only limit savings abilities in the microeconomy but will also limit government revenue for public projects and programs in the macroeconomy. The most concerning element being the future of Social Security. And while I stick to my opinion that current recipients will experience minimal changes to the program during their lifetimes, future recipients may experience many changes.
But these are theories, not actualities. It is a glimpse into how I view the world as history happens. These ideas are hypotheticals which must be considered when creating strategy, but not necessarily taken as truth. Just as we see government officials providing several ‘possibilities’ of what children will experience in the upcoming school year (with no clear indication of what will actually happen) we must consider every possible future scenario in order to better manage our current reality.
Time will tell what will be the ‘new normal’, if we buy into the idea that there is a current normal. I submit that nothing is normal, but rather a set of ever changing variables. We, as savers and investors, need to be aware of our surroundings, but focus on what we can control.
Head down, work hard, save a lot. Don’t worry about what all the things that may happen, because the odds are that most of them won’t happen.