By Nicholas W. Stuller
It is said that history does not repeat, but it does rhyme. Sometimes, however it does repeat and repeat identically.
January 15th, 2019 was the 25th day of a partial government shutdown, the longest in our country’s history. Over 800,000 federal employees went without pay and the effects were personally devastating to them, and their plight rippled through the local economies. I wrote about it in my personal blog then, but I made the point that day 25 of the shutdown was not the worst statistic.
What was the worse statistic? That these government employees, along with 78 percent of Americans, according to a 2017 CareerBuilder study were living paycheck to paycheck. What the Shutdown and COVID-19 have in common is that they both have shown the light on the problem of Americans not saving enough and when disaster strikes being in danger of not paying bills after only two missed payrolls.
Make no mistake, the impact of Corona and the impact of the Shutdown are not comparable. However, what is identical is the problem they shine on a light on is identical: most people are lacking in basic personal financial concepts like having a reasonable emergency fund in case of the unexpected. We are watching the news daily of everyday people stating they have no idea of what they will do in the next two weeks because they must shelter in place. Restaurant workers, sales people paid completely on commission and hourly workers all are worried sick about what will happen. There is some hope between the CARES Act and the Payroll Protection Program, but there are many, many gaps in these programs, not to mention the PPP has already run out of money, waiting for congress to agree again.
Nearly every financial planner and financial expert opine that everyone should have at least 3 months of living expenses banked in case of emergency, and many say six months. Clearly there are people in our society that literally can only live paycheck to paycheck, however that number is no where near 78%. So why is it that so many people who can afford to have an emergency fund, do not? The drag on society, family, and the emotional drag on oneself for this large group of people is avoidable.
Perhaps once the Coronavirus is at a manageable point, hopefully by the end of 2020, those in the financial advice and financial education arenas can convene for a new look at an old problem and see what can be done differently to encourage people to save.
While this current disaster will likely be unique, hopefully we can reduce the instances of the identical mistake of a lack of planning in the future.
Nicholas W. Stuller is the Founder and CEO MyPerfectFinancialAdvisor, a 30-year veteran of the financial services industry and author of THE TRUTH SHALL SET YOUR WALLET FREE: Secrets to Finding the Perfect Financial Advisor, published in 2018 by Post Hill Press.