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COVID-19 super savers must navigate a post-pandemic world cautiously

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Just over a year ago, COVID-19 hit the United States, changing the fabric of our daily lives and disrupting the personal finances of the average American. In a matter of weeks, 52% of all households reduced their spending. Out of all the upheavals and sweeping changes has emerged a new generation of risk-averse and financially conservative people: Meet the Super Savers.

After COVID hit the United States, we saw a nationwide jump in the personal savings rate – the amount of people’s disposable income that is saved or invested. Over the past two decades, this savings rate has stood at just under 10%. In April 2020, it exploded to 33.7%, more than three times its usual number, according to Federal Reserve data.

Fast forward to 2021. The pandemic continues to wreak havoc and 61% of Americans say they are at risk of running out of their emergency savings. Super savers are the opposite of that spectrum. These are middle-class families who have adopted an aggressive level of precautionary savings, or they are high-income individuals who have seen their spare expenses, such as entertainment and travel, plummet.

There may be a light at the end of the tunnel for COVID-19: The current administration expects 300 million vaccines to be administered by the end of July. Things may be getting back to normal, but where does that leave the super savers who have embraced extreme and unsustainable frugality? They have had the luxury of an altered pandemic budget working in their favor, but when a sense of normalcy returns to our daily lives later this year, how will they cope?

Super Savers will have the opportunity to spend their new nest egg and may feel like they deserve to make up for lost time. When quarantines finally end, the temptation will be endless. If super savers aren’t careful, the pendulum could tip the other way, paving the way for bad spending habits. They will need to allocate their funds wisely in advance instead of falling into the trap of excess.

Here are some handy tips to keep in mind as they work their way back to normalcy:

We have experienced a high degree of societal turmoil in recent months, which has bled into the long-term investing practices of so many Americans. Households driven by extreme frugality may have lowered their 401 (k) contributions to have more cash. It’s a corner you can’t afford to cut. In the post-pandemic world, super savers need to pursue their long-term investment strategies.

Despite a historic level of stock market volatility in recent months, super savers should not allow their level of characteristic risk adversity to affect their willingness to invest. This year has been filled with incredible investment opportunities for those willing to take even a small risk. But for those who are frugal oriented, the age-old advice is true: stay the course. Maintaining a strong investment portfolio is worth more than holding onto your money, and super savers are in a timely position to overcome market instability.

Too much extra money and nowhere to spend it? This is the challenge super savers face when COVID-19 abates. It will be tempting, even for the most frugal person, to embark on a spending spree; it is human nature. Whether it’s a major home renovation, a new car, or extra spending on entertainment, super savers will struggle to keep the nest egg they’ve built.

With interest rates at their lowest, now is the time to make those rates work for you. Look for ways to reduce your existing debt – by refinancing your mortgage or looking for a lower APR on your credit cards – instead of accumulate new debts.

COVID-19 has transformed our homes from a simple living space to a center of work, school and entertainment. During the pandemic, it was too easy to justify paying for dozens of streaming services, such as Netflix, Amazon Prime, or HBO Max.

As the world opens up again, it’s time to analyze what services you’re paying for and cut back where you can. As things like travel and entertainment expenses come back online, small recurring charges can accumulate without providing the same level of value as before.

COVID-19 has made many tax-conservative households by accident. Families with stable incomes and a lack of goods and services to spend them on may seem responsible on the surface, but rapid and sweeping changes in personal finances can lead to poor spending habits down the road.

A more realistic budget is one that is flexible and focused on near future. When things get back to normal, as they inevitably will, super economy models will no longer be feasible. To continue to enjoy good financial health, avoid big impulse purchases that further burden your household with debt, and think about the real costs, such as child care, gasoline, and food. Plan concrete and plan money for emergencies, but don’t rack up for a doomsday scenario. By adopting a sound, sensible budget now, super savers can avoid financial pitfalls when we all come back down to earth.

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