In another post three weeks ago, I described 11 recent personal finance trends, most of which were informed by the pandemic. This post continues the analysis with a description of nine more financial current events.
As the popular saying goes, “Knowledge is power.” Knowing what is happening in the world of personal finance can help you make better financial decisions, seek out resources (if needed), anticipate future changes, and reduce stress during this very uncertain time.
Below are brief summaries of recent events affecting different aspects of personal finance:
OASDI Tax-Deferral Plan
The plan to defer 6.2 percent OASDI (Social Security) payroll taxes from September through December 2020 until January through April 2021 is seeing mixed results in different workplace settings.
While it is being implemented for federal government workers, many large companies are not changing their workers’ tax withholding.
A major reason, in addition to administrative hassles, is uncertainty about whether deferred taxes would be eventually forgiven by Congress as well as concerns about collecting double OASDI tax from workers in early 2021.
Bifurcated COVID-19 Impacts
Existing income and asset disparities among Americans have widened as a result of COVID-19.
As I explained in a recent webinar for Rutgers Cooperative Extension, there are individuals who are worried about finding food, paying bills, and being evicted.
There are also those with secure incomes or pensions who have been able to save more because there are fewer opportunities to spend money.
This can include work-related expenses such as commuting and eating out. A Wall Street Journal article described this trend as follows: “For Workers, Downturn Bares Deep Rifts.”
End of Airline Change Fees
In an attempt to lure back wary customers and eliminate a barrier to making advance travel plans during the pandemic, the “big three” U.S. airlines (United, American, and Delta) announced that they were removing flight-change fees on most U.S. domestic flights.
American has also dropped fees for many international flights, and Delta continues to block middle-seat assignments to promote social distancing. Major airline workforce reductions are expected on October 1, after federal government payroll support ends.
Coupon Clipping vs. Digital Coupons
For the first time ever, the use of digital coupons surpassed the redemption of paper coupons in the United States. In July 2020, 31 percent of coupons were redeemed digitally and 26 percent were from newspaper inserts (compared to 23 percent and 31 percent, respectively, in 2019), according to analysis by market research firm Inmar Intelligence.
COVID-19 accelerated the shift to “digital deals” as more people shopped online. Companies now view digital coupons as providing a better return on investment and a way to nimbly respond to pandemic-induced consumer demand. Inserts and circulars, on the other hand, can require months of advance planning.
Business Interruption Insurance Rulings
Court rulings have upheld rejections of business interruption insurance claims by insurance companies. Most business owners with policies purchased to cover the risk of having to close down their business have not been able to successfully make claims.
The insurance industry has maintained that these policies were intended to cover events, such as fires, after which rebuilding can occur and that pandemics are not a covered risk. In addition, insurance companies cannot operate profitably when so many people experience losses at the same time.
Young Adults Living With Parents
For the first time ever, more than half (52 percent) of 18- to 34-year-olds are living with their parents, up from 47 percent in February, according to Pew Research Center, at levels last seen during the Great Depression (48 percent in 1940).
This statistic includes jobless college graduates, undergraduates taking online classes at home, and those taking a gap year.
Parents’ finances are impacted as a result (e.g., spending more on food, utilities, car insurance, computer software, and faster Wi-Fi service), which reduces income available for retirement savings.
Money Market Fund Fee Waivers
In the wake of coronavirus-induced interest rate reductions, money market fund yields have gotten so low that some investment firms have had to waive management fees in order to prevent their account owners from experiencing negative returns.
Companies reported to have done this include Blackrock, Fidelity Investments, and J.P. Morgan Asset Management. Money market fund account owners should carefully review shareholder reports and compare available options for holding cash equivalent assets.
Low Mortgage Rates
In August 2020, the average interest rate on a 30-year mortgage fell to 3 percent, according to Motley Fool.
In early September, the rate rose slightly to 3.05 percent, still a bargain in comparison to 2019.
Home values have remained strong as many homeowners delayed putting their houses on the market as a result of the pandemic, thereby reducing the number of homes available to buyers looking to make a move while interest rates are historically low.
Fewer Purchase Options
Retailers and restaurants have been “slimming down” consumer choices as a result of supply chain bottlenecks, production slowdowns, lower sales volumes on less profitable products, and concerns about product preparation safety.
Examples include fewer unique products on supermarket shelves, less choice on restaurant menus, and reduced or delayed shipments of big-ticket items including motorcycles and cars.
