Before 2020, Russell Jessop knew the wisdom in having emergency savings tucked away.
But the year’s financial mayhem supplied him — and millions more — with a harrowing master class on that point.
“It’s just unbelievable how fast things can change,” said
the 23-year-old pipe welder working in North Dakota’s oil wells and natural gas
facilities. From month to month, even week to week, “the landscape of your life
can be world apart,” Jessop said.
Federal Reserve Chairman Jerome Powell would agree; data from the country’s central bank showed 40% of the jobs under $40,000 that existed in February were gone by March in an economy buckling from the pandemic.
As for Jessop, when energy demands sank in the spring as people stayed home, Jessop was paid, but didn’t work all May. That was time for him to think hard about what would happen if he was completely out of work and without income.
Now, Jessop’s 2021 resolution is to get serious about building his rainy day fund — but to do it in small, attainable steps instead of psyching himself out with a goal that seems out of reach from the start.
Jessop is automating a monthly transfer from his checking account to his savings account. He’s also incorporating the money he’s saved from a vehicle refinance.
Jessop says he’s absolutely sure he can stick with this resolution to improve his financial footing.
Others are hopeful too: 88% of people surveyed by Allianz Life said they expect their 2021 money situation will either improve, or remain the same. More than half, 57%, are putting their top 2021 focus on health and wellness, while 23% put financial stability first, the survey said.
After a year like none other, here are 10 New Year’s resolutions based on MarketWatch reporting that can help you get to a better place for your health and your wealth in 2021.
1. Don’t keep up with the Joneses
Economists talk a lot about the K-shaped recovery from the pandemic, and perhaps nowhere was that more evident than in the country’s housing market.
Millions of renters — largely because of COVID-related job losses — have struggled to keep up with their housing payments. With additional rental assistance and extension of a nationwide moratorium on evictions hanging in limbo, many could be facing the threat of eviction at the start of the year.
For those who were more fortunate, 2020 has been a buying frenzy. Mortgage rates have dropped to record lows over a dozen times this year. The allure of low interest rates combined with a desire to have more space for raising kids or working from home propelled thousands of households nationwide into the home-buying market.
Home sales have begun to cool in recent months — in large part because there aren’t enough homes to go around, and the prices keep going up for the homes that are for sale. But with mortgage rates remaining low, many families across the country are mulling getting themselves into a new home in the New Year.
But experts caution against making such a big decision because of the peer pressure. In other words, just because your friends are scoring a home with a white picket fence in the suburbs doesn’t mean you should. “While it is important to take advantage of market opportunities, such as low rates or rental concessions, be wary of letting the market dictate your decision making,” said Tendayi Kapfidze, chief economist at LendingTree. “The best approach is to make a lifestyle decision, around type of housing and location, then execute as best you can given market conditions.”
Whether you’re looking to continue renting or to buy a home, saving is a virtue. With future financial relief by no means a done deal, renters should do what they can to ensure they have back-up funds to pay for their housing costs.
Prospective home-buyers, meanwhile, should save up for more than just a down payment. That’s just the start. “There are more buyers than sellers, so if you’re selling a home today, you’re confident that you’ll get multiple offers,” said Holden Lewis, housing and mortgage expert at NerdWallet. “When you get those offers, you’re going to eliminate the least-attractive ones.”
Buyers who can make a large down payment and pay all of their share of the closing costs associated with a deal will have a leg up. And when saving that money, think twice before putting it in the stock market. The return on equities may be better now than what you’d get from a savings vehicle, but the risk is substantial.
2. Prepare for the New Normal
When will the world return to the way it was? The hard truth, according to some social and economic commentators, is that it won’t. It will be the same, but different. People will return to the cities after herd immunity has been reached with the help of the two vaccines available in the U.S. from Moderna
3. Build up a social network for hard times
Throughout this past year, it’s been easy to fall out of touch with friends, colleagues and acquaintances. Many of us have been working from home — and even for those who haven’t, the pandemic has made typical social gatherings all the more challenging.
It may feel like more of burden to reach out and schedule a catch-up over Zoom
but there will be real benefits to doing so. In April, studies showed that more than 40% of Americans felt lonelier than ever because of the pandemic. At that time, experts warned about the implications for people’s mental health. Studies have even shown that our social isolation could increase the risk of dementia in older adults.
Proactively communicating with others can stave off those feelings of loneliness, and prepare us for what could be many more months of this reality before the pandemic is over.
There are, of course, other ancillary benefits to strengthening our social networks in times like these. As millions of Americans can attest, a pandemic can cost you a job in the blink of an eye. While we may think of networking solely within the confines of our professional spheres, it’s important to remember that friends and family can give you a boost in this arena.
“Word-of-mouth vetting by someone who’s already employed somewhere is going to serve you exponentially better than you sending out 50 resumes,” EB Sanders, a career coach based in San Francisco who specializes in working with creative types, previously told MarketWatch.
Even if you’ve been laid off, being open about your experience can help you manage to find new footing. “No one is going to be shocked if they receive a phone call from someone they haven’t heard from in a while saying, ‘Hey, like many others, I lost my job. This is what I’m looking for. Do you know anyone that I should talk to?’” Sanders said.
4. Show grace under financial pressure
Even in the best of times, that’s easier said than done. But
doing it now can aid a person’s financial decisions.
It’s easy to spot the financial pressures. Just over half the 22 million jobs lost during the pandemic’s initial shock in early spring have come back, and the November unemployment stands at 6.7% — fueled in part by 400,000 dropping out of the workforce. Personal income continued a slump in November while Thanksgivings across the country were marked by lengthy lines at food banks.
Over one-third of Americans in one survey say they’ll be in “survival mode” during 2021, focused solely on making ends meet day to day.
Taking a breath and maintaining that grace will result in less
impulsive, more far-sighted money decisions, experts say. Taking a moment to reflect
on goals and then finding small, achievable steps towards those goals will
build psychological momentum, which is critical they say.
5. Don’t believe the hype
2020 planted a lot of phrases and words in the popular lexicon, including “pandemic” and “lockdown” — but how about “retail bros” too? As more people try to play the stock market themselves, experts say they’d be wise to approach market hype and slick platforms with some skepticism and caution.
New investors can start by thinking of Airbnb and Robinhood as case studies. Earlier this month, shares in Airbnb
the short-term home rental company started trading publicly in a massive IPO…and then the stock price dropped, before rebounding to new levels. (The stock closed Thursday up 7% from its mid-month start.)
This reaffirms the observation from financial advisers that even well-known brands can be volatile when they start trading in public markets, so anyone buying needs open eyes and a tough stomach.
Then there’s Robinhood, the stock-trading app geared towards new investors. It recently agreed to pay a $65 million Securities and Exchange Commission penalty to resolve charges that it allegedly misled customers about how it made money despite commission-free trades. Customers collectively missed out on $34.1 million because the platform allegedly didn’t secure the best stock trade terms, regulators said.
Robinhood didn’t admit or deny the allegations but said the company is different now. Consumer advocates say it underscores the point that in this era of $0 commissions, there’s still no such thing as a free trade.
6. Always read the fine print
Unfortunately, just because you’re entitled to financial relief doesn’t mean you’ll get it easily; some Americans waited months after the CARES Act, the first coronavirus relief bill, was passed in March before they received their first stimulus check.
The obstacles to receiving a government benefit to which they’re entitled is a challenge student loan borrowers know all too well. Even after Congress paused student loan payments and collections as part of the pandemic-relief package, borrowers still saw their paychecks seized to repay student debt and their credit scores dinged.
Before the pandemic, borrowers faced challenges accessing the Public Service Loan Forgiveness program, an initiative that forgives the federal student loan of public servants after 10 years of payments. Borrowers have reported receiving wrong or not enough information from student loan companies that derailed their progress towards having their debt discharged.
One borrower, who successfully had her debt forgiven through the program, described her efforts — including dozens of phone calls and copious record-keeping — as “a crusade.” Though hopefully it should take less effort than what she described to access promised relief, experts suggest borrowers pursuing PSLF fill out an employment certification form each year, the only document that can provide an indication of a borrower’s progress towards forgiveness.
The Department of Education also recently updated its PSLF help tool in an effort to make navigating the program easier for borrowers. President-Elect Joe Biden has also vowed to simplify the program.
Regardless of what student debt forgiveness programs look like in 2021, it will likely still benefit borrowers — or anyone entitled to some kind of relief, whether from the government or a company — to keep records of their phone calls, applications and other documents.
7. Save, save, save
This is something people like Jessop are taking to heart. The savings rate soared in early spring as stimulus checks hit accounts, but the rate has been declining ever since. Many Americans drained their checking accounts with slim savings to fall back on as additional stimulus talks stalled in the summer and fall.
Many financial advisers say you need at least three months of emergency savings, but some social media commenters say even that’s too little to weather a pandemic.
The good news is, even a little bit can help. Maintaining up to $300 can help people avoid utility shutdowns and forced moves , a recent study suggests.
People can cobble even modest saving by avoiding splurges or sticking with a budget plan, experts say. Slowly building up savings with some unspent bucks here and there can help build that all important psychological momentum.
8. Get vaccinated (it will help everyone)
The pandemic has, at the very least, rewritten almost everyone’s daily routines, and at worst, ended the lives of 320,000 Americans and counting.
Its march through our lives has sometimes felt impossible to stop, but luckily each and every person has the power to improve the situation.
Many Americans are pros now at wearing face masks and practicing social distancing. The next step is to get vaccinated when it’s your turn. That process started in mid-December with health-care workers and it will continue well into 2021.
Many Americans will have to wait until late spring or summer to get their shots. But when it’s your turn, “you should jump to get that vaccine,” Emily Landon, the executive medical director of infection prevention and control at University of Chicago Medicine, told MarketWatch.
Some groups, including some Black and Latino people, are reluctant to get the shot — for many different reasons, including a history of medical racism — but the share of Americans who say they’ll do it has been growing in recent surveys. That’s good news, because vaccines only work to halt a pandemic if enough people get inoculated.
“If you have a highly efficacious vaccine and only 50% of the country gets vaccinated, you’re not going to have that umbrella of protection of herd immunity,” the nation’s top infectious-disease doctor, Anthony Fauci, said in late November. “What you really want is one, what we have, a highly efficacious vaccine — but you want 75, 85% of the people to get vaccinated.”
There’s evidence that a good way to convince people to get a vaccine is to emphasize that it’s an important thing to do for other people, not just for themselves. So if you’re hesitant about getting the shots, do it for your neighbor, if not for yourself.
9. See something, say something
Women and people of color have borne much of the economic fallout of this pandemic, and 2020 also revived efforts to correct longstanding disparities for Black Americans.
In the wake of George Floyd’s killing and the subsequent racial justice protests, you may have posted a black square on Instagram, donated money to a racial-justice organization, reflected with friends about your own privilege, or purchased a title from one of the internet’s many anti-racism reading lists.
But as the reckoning with America’s racist past — and present — hurtles onward, activists say the work is far from done. Experts say it’s important to keep educating yourself, and to speak up when you witness racism.
Rashawn Ray, a University of Maryland sociology professor and fellow at the center-left Brookings Institution, says people can become a “racial equity advocate.” That means holding people accountable for their actions and statements about inequality at the dinner table, in your friend group and at work, he said. Don’t let racist statements go unchecked.
“Part of the fundamental way you know you’re an advocate is if you speak up and speak out when the group that’s being vilified is not present or when they cannot help themselves,” Ray told MarketWatch in June. “If you don’t say anything, you’re letting that racist statement ride, and it’s assumed that you support it even if you don’t. You have to purposely say something about it.”
Pushing back with responses like, “I actually don’t agree with that,” “I’m not sure if that’s true,” or “I’m not sure if we should be talking about people like that” can go a long way, especially if there are other people observing, he said.
The same goes for men who want to help women close the gender pay gap and assume more leadership roles in business and politics. Men can be allies for women at work by calling out other men’s bad behavior, and by sharing their salaries with female colleagues.
“It does matter that we as men add our voices to demanding equal pay, to questioning whether we have equitable leadership at the top, to supporting work-life balances that we often think are women’s [issues],” like parental-leave policies, Gary Barker, CEO of the gender-justice organization Promundo, told MarketWatch previously.
10. Give back, if you can
The K-shaped recovery means many Americans’ finances are becoming more precarious by the day, while others continue to sail along, largely unscathed, at the top of the wealth ladder. If there was ever a need for the people who are thriving financially to give back, it’s now — and well into 2021. Food banks and other providers of daily essentials have seen unprecedented need as the pandemic has cost millions of people their livelihoods.
As of Nov. 25 through Dec. 7, some 35% of Americans were behind on rent or mortgage payments and said eviction or foreclosure was likely in the next two months; 31% of Americans expected someone in their household to lose a job within the next four weeks; 12% said food had been scarce in their households within the last week, according to the U.S Census Bureau’s Household Pulse survey.
Donating to a nonprofit that serves people in need is a quick and effective way to make a difference. Donors can focus on organizations directly involved in helping the most vulnerable during the pandemic. They can use their donations to fight hunger, help address racial inequities or help with the vaccine rollout.
Or, if you’re in need of inspiration, take a look at the list of 384 organizations that MacKenzie Bezos, ex-wife of Amazon
CEO Jeff Bezos, donated $4 billion to over four months this year.
“If you’re craving a way to use your time, voice, or money to help others at the end of this difficult year, I highly recommend a gift to one of the thousands of organizations doing remarkable work all across the country,” Scott wrote when announcing the donations. “Every one of them could benefit from more resources to share with the communities they’re serving. And the hope you feed with your gift is likely to feed your own.”
There’s an extra tax incentive to make donations before the end of 2020 and into 2021. The CARES Act made it possible for people to deduct up to $300 in donations from their taxable income without itemizing, and the new stimulus bill would extend and expand tax perk through 2021.