COVID-19 has rewritten many rules of daily living, disrupted plans and reordered assumptions. For those struggling paycheck to paycheck, life got tougher. But for others who still have a paycheck, they had less on which to spend money. Working from home meant no commuting expenses, less gas consumption, trips cancelled, dinners at home or takeout eschewing fancy restaurant outings...boring, perhaps, but lowered expenses. The upshot? More savings.

The monthly personal savings rate in America ranged from 6.5 percent in July, 2016, jumping to a range between 7.2% to 8.8% in 2018-2019 as job numbers grew and unemployment hit record lows. But as pandemic shutdowns ensued, the savings rate soared, hitting an all-time record of 33 percent in April, 2020. As stir crazy people began to move around and spend, monthly savings rates started to drop, hitting 19 percent as of June, 2020. (Bureau of Economic Analysis;

Economists doubt that these piles of cash represent a sustainable change in habits, theorizing that ultimately deferred plans, projects, trips, and back to the office will stimulate spending as COVID-19 fears lessen, and we get a reliable vaccine. But, hopefully, lessons learned will linger. When personal or national black swans cause disruptions to life and plans, having a liquid savings security blanket is peace-of-mind, conferring options and choices on those so blessed.

Per Bankrate’s 2019 Financial Security Index survey, only 40 percent of Americans could cover an unexpected $1,000 expense from savings. Of the 60 percent without sufficient funds, roughly 33 percent would float the expense on a credit card or borrow from some other source. The others weren’t sure what they’d do.

Financial advisers generally recommend at least six to eight months of living expenses in cash reserves to handle unexpected expenses. Given the vagaries of life, up your buffer of liquid cash to the point where you and your family could live for at least a year if one or both of you incur an income interruption. That’s freedom from worry. Freedom to make a job change if need be. It may save your marriage. Financial stress is a leading cause of divorce.

Some experts espouse a 50/30/20 savings formula. Out of net income, allocate 20 percent for savings and paying down debt, eliminating expensive credit card interest first, then other debt such as student loans. Allocate 30 percent for “wants,” such as dining out, entertainment and internet. Fifty percent goes toward “needs,” necessities such as rent or mortgage, utilities, food, current credit card charges, other essentials.

We haven’t mentioned children, a drain on the Bank of Mom and Dad for 25 years or more per child. Having a solid nest egg and good savings and spending habits before your first bundle of joy arrives is fundamental to a peaceful marriage. A February 2018 report from the U.S. Department of Agriculture opined, “Adding a child represents a major financial stress.” For a middle-income family, the cost of raising a child in 2018 dollars was pegged at $233,610, excluding costs for college or vocational training.

Young people are delaying marriage and family formation. Per the Census Bureau, the average age for first marriage for men is approaching 30, for women, 28. Children are arriving later than in the past. More couples are reaching their 50s with very expensive years ahead for kid’s activities, educations, cars, clothes, trips, etc., as parents begin to focus on shrinking time frames relative to retirement, business succession and financial independence age-related goals.

Note the goal of “financial independence,” absolute nirvana when it comes to fulfilling and purpose-driven peace of mind and flexibility. Getting there will require a solid financial and career development plan, and, yes, sacrifice as money is set aside for the future based on goals and timeframes.

An emergency fund in safe insured savings plans will yield little in terms of interest today, but ready cash has it’s place. Work with an adviser to establish goal and growth-oriented investments, with an understanding of “long-term” risk/reward implications. As taxable income grows, tax reduction strategies play a role. Tax-wise planning is likely to be more important given record deficit spending by Uncle Sam and virtual certainty that taxes will rise in coming years.

Invest in yourself, training, education, growing in strength and earning power by adding skills and knowledge. Then boost your savings rate. Invest early, often and wisely.

Follow the Warren Buffett Rule: “Do not save what is left after spending, but spend what is left after saving.” Add to that advice from Thomas Jefferson who urged, “Never spend your money before you have it.” Timeless counsel!

Lewis Walker, CFP®, is a financial life planning strategist at Capital Insight Group; 770-441-3553;  Securities & advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis is a registered representative and investment adviser representative of  SFA, otherwise unaffiliated with Capital Insight Group. He’s a Gallup Certified Clifton Strengths Coach and Certified Exit Planning Advisor.

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