What Americans spend their money on during COVID-19

Reader,

Today, I want to talk about two articles I read recently. 

The first is this one from the New York Times, "How the Virus Transformed the Way Americans Spend Their Money":

"In a matter of weeks, pillars of American industry essentially ground to a halt. Airplanes, restaurants and arenas were suddenly empty. In many states, businesses deemed nonessential — including luxury goods retailers and golf courses — were ordered closed.

"'This is the sharpest decline in consumer spending that we have ever seen,' said Luke Tilley, chief economist at Wilmington Trust."

The second is this one from CNBC, "U.S. savings rate hits record 33% as coronavirus causes Americans to stockpile cash":

“'There is a tremendous uncertainty and virus fear that is lingering, and that is restraining people’s desire to go out and spend as they normally would,' said Gregory Daco, chief U.S. economist at Oxford Economics."

What do you notice? A few things:

• Spending is down overall. This isn’t surprising. Coronavirus hit day-to-day life harder than most of us thought it would. For many, it meant entering a new reality where spending on things like shopping, bars, and restaurants was no longer an option — especially if you were laid off or furloughed.
• But spending is up in specific places. What we ended up seeing is that people began to shift their spending towards other places like groceries, delivery, ebooks, and video games. So it doesn’t mean that people aren’t spending at all. Their priorities have just shifted dramatically. Interesting...
• Saving is WAY up. Look at that spike in savings in the second article. That thing looks like my heart rate after I hear the words, “We’re out of habaneros.” People are responding to coronavirus by holding onto cash more than ever before.

My takeaway: Financially, people are reacting exactly how you’d expect them to during a global pandemic — saving more for emergencies and spending more on areas like food and in-home entertainment. In fact, I’ve been recommending targeting a 1-year emergency fund.

But there’s another layer here that’s rarely discussed beyond a graph or two:

What are people spending MORE on?
Why? And who are these people?

These people are typically the ones who have the basics of personal finance mastered (maxing out their IRA/401K, high earning jobs, etc). A lot of these people are IWT readers who have been quietly sharing their spending with me via email and IG DMs, since they can’t really talk about this stuff publicly.

In fact, some of them have even dialed up their spending recently. 

That’s why I want to hear from you. If you’re a high earner, I want to know how you’ve been spending money during quarantine. Just reply and let me know. 

Later this week, I want to take a look at the ways we can still spend on the things we love — even during quarantine. 

Talk soon,