PETE THE PLANNER: As pandemic eases, lifestyle spending will increase

In September 2020, I wondered aloud in this very column what the financial sensibility of Americans would be like when the pandemic was over.

I surmised that Americans would potentially experience a renaissance of resourcefulness, stoked by the powers of scarcity. This, according to my theory, would lead to modesty over consumerism and a healthy savings rate that could persist for years.

Hahahaha. What a noob.

I remember the first time I heard someone say YOLO. I had no idea what they were talking about until it was explained that it was simply an acronym for You Only Live Once.

From what I’ve seen over the last three months, I believe one of the primary cultural side effects of COVID-19 will be unadulterated spending in the spirit of YOLO. “If I’m gonna be miserable, I might as well be comfortable,” is the tale currently being told.

The housing market is red-hot, the travel industry is on the verge of poetic justice earned by a year lost, and certain consumer goods are increasingly difficult to find (and not just because of large boats getting stuck in man-made waterways in Egypt.)

I did acknowledge pent-up demand could lead to a robust economic recovery, but I didn’t expect people to spend their feelings so hard. But on some level, I get it. I found myself telling my wife I wanted a new shirt to run in this past weekend. “Might as well be comfortable,” I heard myself say, with utter disrespect to the two to three dozen other T-shirts in my drawers.

I now believe the 24-month period ending February 2022 will result in an increase in lifestyle spending as opposed to an increase in the savings rate. My assertion last September was that people would be scared straight, then save. Instead, now I believe people will seek comfort in comfort, as opposed to pragmatism.

That is what’s actually at the heart of my thinking right now—a reimagining of financial pragmatism. I’ve long believed people should put their financial future before their financial present. To me, that’s the essence of financial pragmatism.

Hope is great, but it’s not a financial strategy. Saving the correct amount of money before you spend any money honors math and illuminates the impracticality of hope. But, and this is a giant but, there might be more art than science when it comes to financially thriving.

As you likely know, my classic definition of thriving revolves around a dependable and sustainable financial plan that perpetually wards off instability. However, indulging in comfort along the way, whether for mental wellness or simple joy, seems to have gained ground in the face of the pandemic and the recession. And I think that’s OK.

Just as workers have attempted to shift the paradigm of work/life balance to an arguably more appropriate life/work balance within the last year, maybe that’s where long-term financial planning is headed, too. Maybe, just maybe, people will figure out how to have a more significant financial lifestyle in their working years, then recast their lot to a more modest and sustainable post-work financial existence.

Don’t get me wrong, that’s exactly what millions of people unwittingly do now, without the math to support the theory. But I’m suggesting that people might harness the powers of being more mentally well now and fight harder to make the math work indefinitely.

It’s actually a reasonable evolution. At first, there was the modest working-years lifestyle that created a reasonable nest egg. Then the F.I.R.E. (financial independence, retire early) movement convinced us a spartan existence during the work years can lead to a long and comfortable retirement. Now, after a year of anguish and languish, it’s possible people will figure out how to have their cake and eatit, too.

Which, by the way, is a tough promise mathematically. Will people really be able to spend aggressively during their working years, then glide into a more modest retirement?

I’m not holding my breath.

My gut tells me this grand experiment goes out with a whimper in mid- to late-2022. You’ll know this is the case when consumer debt levels begin to rise exponentially once again. Debt levels are already rising, and I think the savings rate that rose briefly in 2020 will make its way back into the cellar. Yet there is some appeal and practicality to giving mental health more influence in our financial decision-making process.

Check back with me again in nine months—who knows what Americans will be doing then?•

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Dunn is CEO of Your Money Line powered by Pete the Planner, an employee-benefit organization focused on solving employees’ financial challenges. Email your financial questions to askpete@petetheplanner.com.