1 query for spending cash post-Covid

The worst of the bans and shop closings are likely over – but you might want to think twice before you go on the Covid shopping spree.

The Delta variant has proven that the pandemic is still ragingwhich brings with it a new wave of financial uncertainty. Many people spent the pandemic paying off debts – the latest Federal Reserve data shows Americans shed an estimated $ 123 billion in revolving debt over the past year – meaning at least a lucky few have some extra cash to spare. And after a year and a half with the hatches closed, the temptation to output pulses is great.

For Joe Duran, Head of Personal Finance Management at Goldman Sachs, this is the crucial question for every American right now, regardless of wealth or status: If you have excess cash, should you start spending now or wait a little longer?

Duran has worked as an asset manager for the past 28 years and now manages $ 25 billion in assets with Goldman. Since March 2020, he says, his customers’ priorities have changed noticeably.

For example, the traditional advice of having a three to six month emergency fund may no longer be enough: Duran says its customers are now expanding their emergency nets to up to 14 months in spending. “No matter where you are on the wealth spectrum, we should all never forget what it felt like 14 months ago when the pandemic broke out and no one knew what was going to happen,” says Duran.

The next step is to determine if you have saved up enough to survive the latest wave of pandemics. Here is how.

When to spend – and when to save

The answer to Duran’s question is not as simple as “keep saving”.

For most people, the answer is very situational. The way Americans think about financial stability has changed radically in the last year and a half, says Duran – and even calls it “The big reset“in a recent InvestmentNews op-ed. Retail spending recorded one explosion in the spring, but those sales only started to decline last month. Meanwhile, consumer sentiment took a dramatic downturn and hit its lowest levels since 2011.

If your savings are depleted from paying off debt during the pandemic – or spending your cash reserves to survive – your focus should probably be on rebuilding and avoiding your emergency network Pulse outputs. Hitting this six month savings benchmark is a good start, but Duran recommends hitting a full year of savings before you start relaxing.

“It’s not necessarily a good idea to just spend everything like there’s more money coming tomorrow,” he says.

As soon as you have one year of emergency money, Read back on your long-term priorities – like buying a car, buying a home, or saving for retirement – before moving on to other types of expenses. Duran advises asking questions like:

  • How much do I need to retire comfortably?
  • Will I lose my deposit for the house or car I want?
  • Can I be unemployed for a year and cover my livelihood?

If you’re one of the lucky few who is content with your current savings, says Duran, there’s nothing wrong with spending on your personal happiness as long as you set parameters. Be clear about how much you can spend and how often to spend to avoid a long-term impulse buying habit.

“There will always be a new crisis,” says Duran. “We need to understand how each individual could affect our future behavior so that we can adapt to a new world.”

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