Why financial experts are optimistic about 2021
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2021 may have had a shaky start but financial experts say there are many reasons to be hopeful this year. President Joe Biden was sworn in earlier this week, promising a new stimulus package, tax breaks and more widespread vaccine distribution. We asked a few certifed financial planners why they’re optimistic about the months to come. Here’s what they said.
Americans who were able to keep their jobs and work from home through the economic fallout are saving more and spending less on things like entertainment, commuting or dining out. The U.S. personal savings rate rose to a record 33.7% last April and consumer spending fell 12.6% around the same time, according to data from the Federal Reserve Bank of St. Louis and U.S. Bureau of Economic Analysis.
Some experts picked up unexpected, money-saving habits that they plan to continue into 2021. “I began dyeing and cutting my hair at home, and cutting my dog’s hair and nails, things like that. My son even learned to fix the brakes of his car on YouTube,” said Monica Dwyer, certified financial planner at Harvest Financial Advisors. “My expenses have gone down and it’s really freeing.”
Consumer spending has somewhat rebounded, and personal savings now sits at around 13%, still higher than any other time in recent history. Dwyer, like many Americans, are using this time to revisit their budgets and shave down their essential expenses.
“My finances are in better order,” Dwyer said. “It gave me time to be grateful. Things we couldn’t do before have made a big difference. While I would like to go out to eat and not cook, has really changed the way I think about how I’m spending.”
Experts believe spending will shoot back up once the virus is under control and the economy begins to reopen. “There’s a lot of pent-up demand for when things do get better,” said Richard Colarossi, certified financial planner at Colarossi & Williams. “My clients are just dying to go out and spend and take trips.”
Just be sure not to spend all the money you just saved. We’ve got a downloadable sheet to help you track your expenses in 2021 and beyond.
The stock market had a record year in 2020, despite a sharp decline in March and April. The S&P 500, which measures the performance of the largest U.S. companies, rose more than 16% over the past 12 months. The Nasdaq, which tracks more technology-specific companies, rose 43.6%, the best year since 2009.
Experts think it will only go up.
“When the stock market tanked, we were understandably nervous,” said John Cooper, certified financial planner at Greenwood Capital Associates. “But the second half of the year the market just came out of the gate at full speed. I’ve had a great year and my clients have had a great year.”
It’s no secret that stocks can fluctuate. But that doesn’t mean you should panic when the market drops. Here’s our guide for investing during COVID-19.
Colarossi believes a Biden presidency can navigate the country out of the pandemic and stimulate the economy through legislation — both things will help the markets and your money in the long run. His administration has already proposed policies that would offer more direct stimulus relief to Americans, help first-time homebuyers and assist workers with saving for retirement, just to name a few. Here’s a full breakdown on how his initiatives could affect your money.
“There’s a connection between politics and the economy and your personal finances,” said Colarossi. “I think this new administration will focus more on the pandemic and getting economic relief to Americans. So in the short term, things don’t look so great, but I think there’s a real potential for things to get better.”
The pandemic is incredibly isolating, exasperating and depressing. But it has also revealed the good in many people. People seem more grateful for interactions with each other — and more charitable, says Dwyer. She recounted a story of a stranger paying for her doughnut in a drive-through, something that’s “never happened before!”
2020 is in the rearview mirror and the end of COVID-19 is on the horizon. But if you’re worried about your money in the short term, experts agree you should keep calm and stay the course. And while it’s always important to “hope for the best and prepare for the worst,” said Cooper, it’s OK to give yourself a little bit of optimism after a bleak year. If you’re looking for actionable ways to grow your money in 2021, we’ve got an e-book with 50 money moves to make during this recession. You can sign up here to get your free copy.
Image: Nastia Kobzarenko
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