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  • Writer's pictureHarry N. Stout

135- Ten Ways the Pandemic Has Changed Our Financial Lives

Updated: Jan 15, 2021

Do you know anyone who has not been financially touched by the COVID-19 pandemic? I have thought and thought about this and my answer is a resounding no. It is in many ways just like the Great Depression of the 1930s in that we are all being impacted. I thought it would be of value to highlight the 10 major changes we are seeing and what they mean for your money.

In my opinion, the changes the pandemic has brought about will be with us for the long-term. They are not just challenges to deal with in the next few years. What we have and will see are seismic impacts to our economy and how we need to manage money. Here are the 10 ways that I think hit home the most for individuals:

1. Joblessness and Underemployment

Many people, particularly those with direct customer facing responsibilities, have experienced job losses or cuts in their salaries or available hours to work. As surveyed by Motley Fool’s Ascent in mid-2020, 18% of salaried workers reported an income loss while over 27% of hourly workers completely lost all employment income. Recent reports have stated that 50% of the approximately 25 million people who have lost their jobs due to the pandemic will not see their former positions return. These changes have hit woman and lower earners the hardest. Employment uncertainty will be with us for a longtime. The importance of keeping your skills up to high levels or being retrained for new positions will take on new importance.

2. Bankruptcies and Downsizings

We have seen the first wave of companies of all types downsize or cease operations, with some declaring bankruptcy. This includes retailers, airlines, restaurants and energy-related businesses. As these companies go through these changes, their employees are experiencing job loss or pay cuts. All of this is increasing the number of individuals who have exhausted all of their financial assets and borrowing power. They may have no other option than to reorganize through bankruptcy and seek a fresh start.

3. Declines and Problems With Credit Scores

With all the employment uncertainty and job loss, workers' ability to pay their bills on a timely basis has suffered. This has resulted in an erosion in their credit scores, affecting their ability to borrow on good terms. As more people struggle with their finances, problems have also shown up with what is reported to the credit bureaus because of undocumented agreements to delay collections. In some cases, credit-card companies have unilaterally (this is their contractual right in most all cases) reduced available borrowing limits for people who reported payment difficulties, resulting in a hit to their credit scores (which drop when more of a person's remaining credit has been utilized). In other cases, lenders or credit bureaus added erroneous information to consumer files for a variety of reasons.

4. Expected Future Rates of Investment Return

Given the actions of the Federal Reserve, economic uncertainty and the huge amount of government fiscal stimulus, the annual return on insurance, bank and investment products has and will be substantially reduced and will likely stay at lower levels for the foreseeable future.

5. Planning for Government Assistance

Consumers are also beginning to awaken to the realization that the government can’t be the unemployment, life, health and disability insurer of last resort. The financial capabilities of our governments have been diminished. More personal financial self-reliance is needed.

6. Emergency Funds Have Been Depleted

Even before the pandemic hit, the Federal Reserve reported that about 40% of Americans reported that they couldn't cover an unexpected $400 expense without borrowing or selling assets. The COVID-19 outbreak has made money issues more worrisome for people in this group. Many unemployed individuals have become dependent on stimulus checks and expanded jobless benefits – two programs whose existence continues to be subject to partisan political whims. Overall, emergency funds have been used or depleted to make ends meet.

7. Reduction In Saving for Your Latter Years

Many individuals who lost jobs or income were forced to take early distributions from their retirement savings or had their 401(k) matching funds cut and will have fewer contribution dollars flowing into their retirement accounts. These actions have created a shortfall in long-term saving goals that will need to be filled.

8. Timing for Claiming of Social Security

There has always been the allure of claiming Social Security benefits as soon as possible, for anyone who has reached age 62. Many older people who have faced job disruptions have been forced into this predicament. But claiming Social Security early comes at a significant cost, as taking benefits before your full retirement age results in lifetime benefit reductions.

9. Your Income Tax Situation

At some point very soon, we as taxpayers will need to pay for the pandemic subsidies and allowances provided to individuals and corporations through higher income, property and other taxes or we will need to accept much lower levels of government-provided services. Consumers need to prepare for taxes increasing, particularly those households at the higher income and asset levels. We should all prepare for government provided services of all types to decrease.

Also, please remember that unemployment benefits, including the additional Federal pandemic payments, are taxable, so plan for a 2020 tax bill if you were out of work and didn't have sufficient taxes withheld from your unemployment checks. Another danger awaits anyone who permanently withdrew money from 401(k) plans or traditional Individual Retirement Accounts — or those who can't repay a 401(k) loan. In general, this money is taxable, and you might face a 10% penalty if you withdrew the money prior to age 59 1/2.

10. Increased Financial Stress and Anxiety

The pandemic financial fallout also appears to have contributed to greater personal financial stress and anxiety. Americans polled in mid-year by Charles Schwab rated their financial stress at an average 52.5 on a scale of 0 to 100 (where increased stress equates to higher scores), up from 45.9 in January. A lot of people expect their money worries to remain elevated even after the virus subsides.


What you learn and experience from the pandemic will shape all aspects of your financial life, much as the Depression of the 1930s impacted our ancestors. It is best for each of us to reflect on what has happened and make changes to our financial lives as quickly as possible. I don’t know what the future looks like, but I do know that money matters have changed for all of us. What was conventional wisdom just last year no longer applies. We are in for an interesting period.


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