The Big Spend

Put down your mask and pick up your credit cards! The big spend is upon us…

It’s hard to believe that it has been two years since COVID-19 blindsided the planet. What most thought was going to be a temporary work and school hiatus evolved into a multi-year global pandemic. Besides the unfathomable world-wide human toll, the economic impact has been devastating.

Since March of 2020, thousands of businesses were forced to shutter their doors and millions of people found themselves suddenly out of work. According to the Center on Budgetary and Policy Priorities, by December 2020, 37% of people in the U.S. reported having difficulty sustaining household expenses. Fourteen percent admitted that they were struggling with food hardship. According to a report by the Federal Reserve Bank of New York, non-housing debt surpassed pre-pandemic levels, ending at $4.33 trillion for the fourth quarter of 2021. Congress stepped in with an economic relief package, providing a big relief to the most heavily impacted communities.

Those fortunate enough to keep their jobs throughout the pandemic fared much differently economically. With the inability to travel, restaurant closures and in person entertainment options limited, the savings rate hit an all-time high. According to the Federal Reserve Bank of Kansas City, a record 33.7% savings rate was reported in April 2020, up from pre-pandemic levels of 7.2%. Thanks to government stimulus checks, penalty free access to tap into retirement accounts and child tax credits, many who maintained employment through the pandemic developed robust savings accounts.

Now that the infection rates are waning and the masks are finally coming off, how will we react as a society? Early economic indicators are painting a very different story from two years ago. According to studies on consumer buying habits and decreased savings rates, the big spend is on!

Americans are spending big bucks to enjoy the finer things in life. The purchase of indulgent items, such as a luxury vehicle, has reached an all-time high, surpassing record levels from 2019.

People are ready to explore the world again! In December 2021, travel spending totaled $92 billion, just 2% below the previous record levels two years earlier. Hotel room demand equaled pre-pandemic levels. Around 85% of Americans have plans to travel over the summer.

With so many people stuck at home, they began to realize their four walls needed some TLC. Approximately 76% of homeowners made at least one upgrade to their residence during the pandemic. Others chose to take advantage of the historically low interest rates and purchased a new house. This excess home buying activity created a shortage of inventory, driving up housing prices. Multiple offers – well over the asking price – didn’t even slow home sales. In addition to all this, capital interest rates remained low during the pandemic. The U.S. experienced a refinance boom with 14 million Americans refinancing their homes. In fact, housing debt saw the largest two-year increase in a decade from $9.80 trillion in the fourth quarter of 2019 to $11.25 trillion in the same quarter of 2021.

What has fueled this spending spree? Perhaps it’s a newfound appreciation for life and the understanding that tomorrow is not promised. Maybe it’s because we all want to have some well-deserved fun. Whatever the reason, many people are reconsidering what they really want from life. The great resignation has allowed employees to move up their retirement age to enjoy more time with their grandchildren. Some people have moved closer to family or have taken advantage of flexible work location policies and relocated to their dream destination. Items you may have considered buying prior to the pandemic – a new house, your dream SUV or a well-deserved family vacation – have now become front and center.

No matter what your new goals are, the utilization of a wealth manager is critical to enable and navigate life decisions on your terms. While some advisors are focused solely on investment management, at Buckingham, we are focused on you and your holistic financial picture. Beyond money and investments, we care about your goals, your health and wellness, your values and the impact your legacy will leave on your family and community. Life is short. You deserve to partner with an advisor with the experience, knowledge and resources to get you to your desired destination, even if it is always changing.

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