COVID Cash Flow
MONEY TALKS – There is no doubt that the Coronavirus pandemic has had a profound effect on Americans. The year started off great with the stock market hitting record highs in February and the unemployment rate near record lows. However, with the global spread of the virus, 23 million Americans lost their jobs in April and unemployment rates soared to the highest they’ve been since the Great Depression. Many who were lucky enough to keep their jobs had benefits reduced and saw salary reductions. That being said, not all of 2020 has been gloom and doom. Many parents who traditionally spent long hours away from their families at the office are now working remotely from home. This has allowed them to spend more time with their children and spouses. Likewise, in a good faith effort to social distance and get out of the house, many families have taken up new outdoor activities such as camping, hiking, fishing, and bike riding. These and many other lifestyle changes brought on by the Coronavirus have had unintended consequences on the cash flow of families across the country. Let’s examine what has changed and how it affects your bottom line.
Travel – As the Coronavirus spread internationally, the United States and many other countries began implementing restrictions on who was allowed to travel in or out of the country. These travel bans, in combination with hotel closures and the fact that many travelers rightfully felt uncomfortable being transported in a 130ft tube of recycled air, led to a $500 billion reduction in U.S. travel industry revenue[i]. These lost revenues were a direct result of Americans staying home, which created a cushion in the savings accounts of many travelers.
Dining Out – On the onset of the virus, many restaurants were required to eliminate all indoor seating. As you would imagine, this forced many households to cook their own meals 3x per day, 7 days a week. This culture shock undoubtedly led to some creative home cooking but also resulted in a dramatic decrease in spending. For many workers, outside of their mortgage, utilities, and car payments, dining out was their biggest expense. With dining out all but eliminated, many saw an unexpected surge in their bank accounts.
Groceries – The Coronavirus pandemic led to a breakdown in the food supply chain across the country. Farmers and food producers who were once supplying restaurants had to shift to meet the demands of grocery stores. Moreover, some of the major meat production plants where temporarily forced to shut down due to COVID-19 outbreaks. These disruptions in the supply chain, in combination with an increased demand due to more Americans cooking at home, caused grocery prices to soar. In fact, the average bill on a single grocery store trip is up $34, or 55% since pre-coronavirus times[ii]. Unfortunately these increased prices have hit families hard in a time of need.
Gas – The drastic reduction in demand, caused by millions of employees remotely working from home, has caused gasoline prices to decrease in the first half of 2020 when compared to the same period in 2019[iii]. Not only are workers saving money at the fuel pump by not commuting, due to state travel restrictions, many families are not taking their annual out of state vacation or visiting relatives. This combination of low fuel prices and reduced driving has led to a significant savings for almost all Americans.
Home Improvement – Now that Americans are spending so much time at home, they are beginning to tackle many home improvement projects that have been on the backburner for years. While many of these projects may improve the homeowner’s quality of life, they do come at a cost. As a result, big box stores such as Home Depot, Lowes, Target, & Walmart all reported increased revenues in the first half of 2020. Certainly some of these projects may have been long overdue; however, they may not have been in the pre-COVID budget.
Outdoor Activities – School closures, travel restrictions, and employees working from home has led most Americans to spend more time at home than ever. Unfortunately spending too much time together can cause some unwanted stress and anxiety. As a result many have opted to get out of the house by engaging in outdoor activities. Camping, hiking, fishing, boating, and bike riding are all great ways to enjoy the outdoors. That being said, unless you are an experienced outdoorsman (or woman), chances are you will have to buy some equipment. Depending on the specific activity, family size, and interest level this could range from a few hundred dollars to a few thousand.
As we transition seasons from summer to fall there may be some additional unforeseen challenges brought on by the Coronavirus. Following state, Federal, & CDC guidelines should go a long way in helping to contain the virus. In the meantime, watch out for one another. Stay safe, and be well.