How the Pandemic Changed Personal Finance

When the pandemic began, offering up personal finance advice was simple: batten down the hatches, prepare for a job loss, save as much as possible. Then came the CARES Act, which required interpretation and understanding — something personal finance experts were poised to do.

But then what? Pandemic unemployment insurance has dried up. After six months, savings accounts are empty. The need for food banks and mutual aid have surged. Jobless numbers continue to climb. 

These changing economic conditions have exposed the limitations of personal finance advice, which I think will have a radical effect on the “advice industry” moving forward.

Here’s why: Anyone who has been in a precarious financial situation knows that when you’ve got $20 in your bank account, you don’t need advice on how to spend or save it. Sure, Suze Orman or Dave Ramsey could tell you that you need to make more money. But what good is that when the only jobs hiring are the ones that you’d have to risk your life to do?

What happens to Suze Orman or Dave Ramsey when the advice they've been giving for years is no longer workable? 

A column recently published in The Cut’s My Two Cents clearly illuminates the situation.

A reader writes in, asking for advice on how to save for an emergency fund this year. They mention that they can barely cover bills and are still trying to pay down about $4,000 in credit card debt on top of private student loans.

The suggestion from Charlotte Cowles, who runs the column, is to first look at balance-transfer options for the credit card debt, which can decrease interest rates, making it easier to pay down. Then she suggests using automatic transfers to start saving the emergency fund.

This is pretty good advice. But the reader mentioned that they can barely pay bills. Adding automatic transfers could leave them with a negative balance in their debit account, leading to overdraft fees.

That the recommendations don't really address this issue is not Cowles’ fault, though. Frankly, if I were in her position, I’d probably offer up something similar. It's hard to save an emergency fund, and even more difficult when something like a health problem (say, COVID-19) drains the money faster than you can save it.

There simply aren’t tools that can make the reader’s debt automatically disappear or their earnings skyrocket, especially during a pandemic. This isn’t something you can quickly change, particularly if your earnings have stagnated and you've already cut costs. When you're in the business of giving advice, though, that's hard to say. 

In response to this difficulty, some personal finance bloggers have shut down their websites, citing the changing nature of personal finance and the growing gulf between the haves and the have-nots. 

Their decision reminded me of an article written by Stella Bugbee called “Our Shared Unsharing.” In it, she writes about how on Instagram this year, “no matter who you are, whatever you posted, you had a high chance of getting it wrong in some way.” 

To be sure, it’s not okay to post things that harm other people, and it’s good to avoid being inconsiderate. But that isn’t exactly what she’s talking about. For example, Bugbee references an experience in which she posted a photo of a beautiful spread of food, only to take it down hours later, lest she seem insensitive to those going without.

I found that anecdote relatable, particularly as I thought about She Spends. I’ve been asking myself questions like: Is it insensitive to write about maxing out your 401(k) knowing full-well that a large swath of readers are out of work?

I think that the answer is no. It’s also true that knowing I can only write so much, I should probably use the words I have to communicate things that can help a lot of you, particularly those who are out of work and struggling financially.

What this pandemic — and the resulting economic conditions — has done for personal finance is forced those giving advice to acknowledge the systemic issues we're dealing with. It's pushed guidance so far beyond chiding readers for spending money on a latte or advocating for frugality over pleasure. That is a win!

There is plenty that we still can write, too. We can share ideas on how to give back to our communities, educate ourselves on how financial systems work and affect our own lives, and learn about what systems may best support us as we work on our own money habits. This isn’t personal finance’s death knell. It’s a welcome change.