When the stock market crashed in 2008, the U.S. economy tanked and people suddenly became very concerned about their finances. The result was a shift towards more conservative investing that made some investors rich but left others in dire straits when they had to sell their stocks from fear of losing everything during an economic downturn.

“The increased savings meaning” is the reason why you are probably richer than you were in 2019. It’s because of the new tax laws that have been put into place.

Believe it or not, you're probably richer than you were in 2019. Here's why

 

According to The Hamilton Project, an economic policy effort inside the Brookings Institution, between March 2020 and January 2022, American families saved an additional $2.5 trillion.

According to the report, households accumulated this “excess savings” — roughly defined as the amount saved over and above what they would have saved if the pandemic hadn’t occurred — by spending less during the COVID-19 pandemic and receiving three rounds of federal stimulus checks between April 2020 and March 2021. Household wealth increased as a result of growing stock and real estate values.

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Class differences in wealth

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However, the epidemic did not bring more wealth to everyone. The survey indicates that those with the lowest incomes witnessed the least asset improvements, partly because lower income groups are more likely to be renters than homeowners. Instead of benefitting from recent rises in property values, many families have seen large rent hikes.

“Those who were able to work throughout the epidemic fared well,” says Nadine Marie Burns, CEO of A New Financial Path in Michigan. Working from home allows employees to save money on transportation, lunch, and coffee. “Those who were driven out of the labor, on the other hand, have fallen behind,” she argues.

Don’t allow that additional income go into thin air. We asked experts how to make the most of any additional funds and how to get back on track if you haven’t made any progress in the prior two years.

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1. Put the money toward your financial objectives.

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Instead of blowing your newfound savings on a new automobile, consider contributing it to your retirement fund or a college tuition fund for your children, advises Matthew D. Gelfand, certified financial planner and executive director of Tricolor Capital Advisors Maryland. “It’s far more wise to say, I have $50,000 more, so let me look at how much new wealth I acquired and how it may effect my plans for the future,” he adds, if you purchase a new automobile but your extra savings is gone.

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2. Establish a substantial emergency fund

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Examine your income during the previous two years: did you provide for yourself, or did you depend on stimulus payments and unemployment benefits? If it’s the latter, Daniel M. Yerger, certified financial planner and president of My Wealth Planners in Colorado, suggests putting the excess money into an emergency fund.

During the epidemic, the federal government provided extraordinary economic assistance. “We may not see the same demand for substantial economic stimulus payments if anything occurs in the next five to ten years that impacts employment,” Yerger adds. It’s essential to maintain a sizable savings account in case the government’s generosity wanes in the future.

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3. Make inflation adjustments

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“As things open up and inflation comes in, the additional savings individuals have may not last the next several years as we revert to pre-pandemic spending,” says Yerger.

Because we haven’t traveled in two years or eaten out very much, many of us have a pent-up urge to spend money. “As we move closer to pre-pandemic conditions, we could go out and spend money,” he adds. With growing costs and inflation, we may have to pay more for the same things and services we’re accustomed to, according to Yerger. “Because our buying power has deteriorated, our excess savings may be squandered,” he continues.

Most families will return to pre-pandemic spending levels, according to Gelfand, but what they spend their money on will most likely alter. “Working from home for part of the week is much more acceptable, so we’ll spend less on transportation expenses, clothing, dry cleaning, and lunch and coffee out,” he adds. If you’re careful about what you spend your money on, you may be able to save part of your savings.

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4. Adjust your financial strategy

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If your family hasn’t made any financial gains, Gelfand recommends adjusting your financial plan to reflect your current circumstances. “You can’t undo the past,” he argues, “but you can modify your financial goals.”

Gelfand suggests a three-pronged approach to catching up, which involves working longer than intended, spending less now, and saving more for retirement. He explains, “Those are instruments that may modify your financial status.”

MediaFeed.org syndicated this story, which first appeared on Policygenius.com.

DepositPhotos.com provided the image.

MediaFeed has more.

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Georgijevic provided the image.

AlertMe

The “pandemic savings” is the name given to a phenomenon that has been happening in recent years. People have been saving more than they need in order to avoid losing their savings during an economic crisis. This trend has led to what some people call a “savings bubble.”

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  • what has happened to personal savings after the pandemic?
  • increase in savings
  • oxford economics excess savings
  • u.s. excess savings
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