The current global pandemic the world is experiencing will forever change many lives individually, entire families, and future generations. For people that lose loved ones, there is no recovery that will ever be made. The psychological and economic impact of the Coronavirus will never be forgotten, but some lessons can be learned.
From a financial and economic perspective, it will be important to learn from this experience to be better prepared for the future. Not everything has been a complete disaster. I am hopeful there will be some real changes in the future that we can make by learning from this experience.
What are some good financial lessons that everyone is learning from the pandemic?
Emergency and Job Loss Funds
A lot of people are realizing the importance of having some money saved. Even before the pandemic, the importance of having money set aside for job loss was extremely important. With employer loyalty at all-time lows and stagnant wages with increasing costs of living, saving can be a challenge. However, some people are only now realizing the importance of having an emergency fund.
I understand numerous families have a difficult time saving money. There is a reason about seventy-eight percent of full-time working people say they live paycheck to paycheck. However, more people are learning that saving money for the unknown is important. It is likely that people, particularly in America, will start to look at their savings more closely.
Americans have been living well beyond their means for decades now and the economic conditions being experienced are going to force people to think much differently. This will hopefully prepare more people in the future if there is another economic and health crisis.
Although I was not surprised, it was still concerning when I recently watched the nightly news with cars in line to receive food donations. It was sad to see, but also very annoying. There are several Americans that are really in need right now and the number of new automobiles lined up to get groceries truly showed the problems that exist with Americans living beyond what they can afford.
With an average new car price tag now of around $38,000, there is a problem with people that can’t afford to save money. Someone that owns a new car should not have an issue with buying food just two weeks into a shutdown of the economy. I even saw a brand-new Acura SUV pull up to get food. These vehicles can start at a cost of $45,000.
I understand some people truly need help during this economic time. Yet, hopefully, the people that should be able to afford saving money will learn from the pandemic. People need to stop living beyond what they can afford. Moreover, they need to plan and ensure their children have a future.
Debt is an Issue
New automobiles with 84-month financing and homes that make owners’ house poor are not something you want. It is probable more Americans will begin to see debt as a problem and if not, they should.
Having large amounts of debt has been the standard for a lot of the population in the United States. Keeping up with the Jones family next door and appearing to live life like a wealthy reality television star seems to have been accepted for some time. This is the American dream many have strived for and it comes with a cost of debt.
The economic downturn as a result of COVID-19 is going to change the way people spend money. Although not everyone is going to learn from the lesson, more people are expected to see debt as a problem and this is not necessarily a bad thing.
Debt will also be an issue with more of the population that has experienced decades of stagnant wages while requiring credit to either survive or maintain a livable standard of life. With much of America having debt obligations, Capitol Hill might finally see there is a real problem with employment wages in the U.S. Better paying jobs have the chance to result in less of a need for governmental financial assistance. Some politicians will learn the importance of keeping jobs in America, but not all of them.
More of not just America, but the entire world is going to see debt much differently when the pandemic ends. People that experience health-related issues due to financial stress will see large amounts of debt much differently.
Financial Decisions Can Have Lasting Results
Countless people live above what they can afford without having any concern for the future. Several financial decisions made now will have positive or negative results. More people are going to learn the importance of truly thinking through any monetary decisions. This will have a positive impact on a lot of society. But there will also be part of the population that learns the lesson too late.
More people are going to realize the importance of saving money. Because finances are going to be tight for a good part of the population, certain expenses are going to be looked at much closer. This might include the cost of eating out or buying clothing. Disposable income spent on certain things will be scrutinized closely. This habit will remain for the individuals that truly learn the importance of saving.
Unfortunately, there is a portion of the population that will learn the value of good financial decisions, but it will be too late. Investors that pull money out of a down market intended for retirement in 20 years will realize a hard lesson. Moreover, people that dip into their retirement savings when they might not need to during this time will learn the importance of retirement planning too late.
There will be lessons learned from financial decisions during the economic downturn with the pandemic. Nevertheless, all this education will not be realized as early as it should. Some learned behaviors will have a positive outcome while other quick decisions will have consequences lasting lifetimes.
Greed and Self-Interest in a Pandemic
Although many companies and people would like to portray their concern during this difficult time for others who might be less fortunate, much of it is either short-lived or fake. The truth is there are a lot of terrible people in this world that will take advantage of a situation to line their pockets for financial gain in hard times. Very few people in this world really truly care about helping others.
From the selfish acts of hoarding toilet paper and buying in-demand supplies while not leaving enough for everyone else, a lot of people just don’t give a crap about anyone else but themselves.
It should not have come as a surprise that some people at the beginning of the pandemic were buying supplies in bulk and more than they probably need. This was not only the case for actual consumers but also the groups of people that purchased things with the idea of turning a profit by reselling in-demand goods. For these greedy people that have the intention of taking advantage of the less fortunate, they should be held accountable.
Capitol Hill and Washington
If you haven’t heard, there have been several politicians that took advantage of their position during the Coronavirus for financial gain. With access to non-public information about COVID-19, members of Congress decided they should protect themselves and even make a profit by trading off inside information for financial gain. I have even written an article on the subject Profiting Politicians and Lawmakers: Insider Trading and Politics.
The governmental representatives that should be acting in the publics’ best interest are often only working on their own behalf. This should not be a shock to most people. However, the few that haven’t learned representatives on Capitol Hill are only there for financial gain will know this now.
Members of Congress need to be held accountable for their actions. Hopefully, the people that profit off the pandemic in Washington from non-public information will be held responsible. If they are investigated and charged, this might finally teach them a valuable lesson that ethics and acting in the best interest of the people that voted for them is what they are elected to do.
Large Corporations to Small Business
It is a challenging time right now financially for small to even some large businesses due to the economic shutdown related to the pandemic. To help, the CARES ACT was passed to provide some financial relief. Although it was theoretically designed to mainly help small business owners, some large corporations valued at hundreds of millions of dollars decided to take advantage of governmental assistance.
It is hard to unravel a lot of things at this time, but when it comes to business and profits there are going to possibly be some lessons learned that have not come to light yet. I might be speculating here, but I believe the odds for fraud and less than honest companies taking governmental funds they shouldn’t have is very possible. Only time will tell, but if some of the recent news tells us all anything it is that people will lie and cheat when it comes to making money.
There are a lot of businesses that are going to try and take advantage of the economic situation in the world. The financial lesson is going to be how several are only interested in their well-being and not their customers or possibly even shareholders. Again, I am forecasting ahead a little. But hopefully, the lesson will be learned by some consumers that several mega corporations are terrible entities. This is going to come to light financially with some high executives still getting their outrageous bonuses while letting large numbers of their employees go.
There Can Be Prosperous Business
Businesses are suffering at this time that would have otherwise always thought to have been safe from a fall in economic conditions. With a complete shutdown of economies with only essential product and service companies open, more people are realizing just how fragile their occupation can be financially.
Although numerous companies are going to learn their business model is not bulletproof, they are also going to acquire new knowledge on different ways of working. This is only going to help in the future for their survival. For example, restaurants that have never had take out are now offering this service and more businesses are moving online for survival.
For people that might have wanted to start a business, they are going to learn which ones have a better chance for survival in hard times. Yes, some companies are doing quite well currently while most are having a difficult time. Just look at liquor sales, delivery services, and firearm sales. Some businesses tend to do quite well in a world of crisis.
Cost Cutting Measures for Business
A big lesson most organizations are going to discover during this pandemic is they have been wasting an enormous amount of money on things they don’t need. Now that remote and telecommute workers are common companies are going to look at the expense of large office buildings. Also, technology is going to show that massive amounts of business travel are an unneeded cost.
Industries are going to have no choice but to look for ways to save money other than cutting jobs and outsourcing labor. This will be a financial lesson learned that will hopefully benefit American workers.
China is a Big Problem
Financially companies are learning the issues with importing goods from China and outsourcing cheap labor. This can be seen with the disruption in China manufacturing and a lot of businesses not getting the things they need to sell their products to customers. This is only going to hurt American companies financially that rely on China.
Some companies are going to learn the importance of American manufacturing for the well-being of their business. This will not only be an important lesson money-wise but also from an American National Security outlook. This can be seen by the reported drug manufactures that decided to have all their products made in China. This has caused an issue with the health of Americans and their access to some medications at this time.
Some corporations have at least somewhat of an obligation to not only make a profit but also ensure the health and safety of Americans. Although profit with these companies always seems to come first, some will have no choice but to hopefully realize there are more important things than just getting rich.
I have no doubt there will likely be some tension with China once the pandemic has ended. The results of the crisis in America are going to be felt for some time economically. This will only create problems with China on some level as additional companies and Washington do decide more manufacturing needs to be brought back to America for its safety and future.
The Coronavirus has started to open the eyes of a lot more people on the problems with American manufacturing infrastructure and trade. I am not quite sure how this will all play out, but from a financial perspective the odds are good there will need to be some modifications.
The Income Gap is Going to Get Bigger
The American economy already had some real problems before the Coronavirus pandemic. Even with record stock market gains and reported low unemployment, there has been a growing gap between the wealthiest and poorest Americans. Wages for a majority of middle America have been stagnant for some time in relation to higher costs of living.
Without some real changes on Capitol Hill and with big businesses, the income gap in America is going to get a whole lot wider as a result of COVID-19. The reason for this is the wealthiest Americans are better positioned to withstand a pandemic. Also, they will be in a better situation to recover. For the wealthy, an economic shutdown is viewed more as a financial disruption opposed to actual risk.
Wealthy people have the money to get the best medical care and delivered services. They will also have the income to take advantage of a recovery in the markets and real estate.
The economic and social experiences Americans are going to have during the pandemic are not going to be easily forgotten. Compared to any recent previous economic downturns this time things are much different. Lives are going to be impacted by lost loved ones and financial hardships. Much of this is going to be long-lasting for lifetimes and future generations.
The financial lessons learned by America are going to create change. Some changes will be short-lived while others will hopefully last. Economic consequences as a result of the Coronavirus pandemic is going to demonstrate to Washington, America, and the rest of the world that real adjustments need to be made to the way we look at life. Changes will need to be made to the way we work, socialize, and plan for the future.