In every crisis, there are always winners and losers. Although we shouldnât treat any recession like a game, once again, during this pandemic, the rich have flourished and the poor have scrambled to survive. But there have been more people who have fallen below the poverty line than caught up since the Great Depression.
There are many reasons behind the staggering wealth gap in America but it is most notably occurs to some because only those who prosper during any downfall follow this deliberately: âPlan for the worst, hope for the best.â
One problem leads to another. Stop being so positive about the future and start planning it. If you donât have a cash cushion and lost your job, that trickles down to a possible eviction, getting Covid relocating to a shelter cramped with others, surmounting medical and insurance bills putting yourself more into debt and never getting a slice of the pie through investments that couldâve easily kept you afloat and in a better secure position if you had a little less fun during the good times.
Iâm not saying become a debby downer for everything in life never taking risks and staying extra comfy getting nowhere. You can easily stay comfortable but earn big especially in the market through calculated risks. Since everyone has their own risk tolerance, it is important to understand what it is so you donât fall below the poverty line all of a sudden when a new disease hits.
It all comes down to planning. If you arent willing to put in the work to secure your future, then expect to be beaten because economic downfalls come in waves, roughly every 5â7 years to be exact. Being overly joyous and believing you will never be unemployed is stupid. Thinking you will never get in a car accident becuase you are a perfect A+ rated driver doesnât mean it wonât happen. You can never buy insurance when you need it and selling your investments to have an extra cash cushion is uneducated and doesnât need to happen with a little extra planning. Thatâs probably the biggest lesson those who arenât in their 3rd beach home and profited off of the big tech monopolyâs earnings are learning this year.
There are many ways people are achieving their financial goals today because these times have made it much easier to boost income in various aspects.
This includes:
-Record low interest rates declared by the Fed to be continued until this pandemic is over which seems to be farther down the road than we initially hoped
-Mortgage rates at record lows around 2.2% APR
-Less spending since travel, leisure and hospitality is halted
-More time to increase side hustles
-Record inflation in the single digits
Those who werenât in their optimal financial path prior to Covid have now seen their net worth skyrocket with spending less, making it easier to pay off debt and spend time educating themselves on their finances while the rich have only surmounted more with the 1% adding 3 trillion in total to their net worths. But we certainly cannot forget the millions of Americans that are dying and becoming homeless daily due to this divide.
1 for All
It is reassuring to hear that philanthropic efforts and contributions have increased this year presumably because donors, those who tend to allocate more than a million have nothing to do with the money anyways. They are making so much bank from the record return in the stock market last year and literally have no where to put the rest of their money as it grows since traveling, a major expense is halted! Having too much of anything is a problem as well. Iâm glad to hear these filthy rich philanthropists havenât resorted to drugs, gambling, playing the lotto or alcohol which most poor uneducated investors resort to when money blows out of proportion.
As Americans, it is our responsibility even though we have to physically stay apart and this country has never been more divided over an election that has little to do with every day life, to try to become a community. According to our past, history repeats itself but maybe it doesnât have to if we start working together not against each other. As much as the rich despise paying taxes to boost Uncle Samâs paycheck, looking at it from a point of view of helping the poor and middle class can help investors as well since stimulus does get poorer into the economy in some sense as blue collar workers earn more with minimum wage increase, work harder, have better existences which all pours into higher profits that shareholders can benefit from. Even big business still love taking advance of tax havens and shelters hiding their money to avoid corporate tax, I try to do my duty and remind myself ever year that when Iâm giving away roughly 20% of my income for free the legal way, that it is helping millions in need.
K-Shaped Recovery
Sure taxes can help bring about more jobs and boost minimum wage, yet last week, the Fed governor acknowledged that the unemployment rate for the lowest earners may be 3x the national average of 6.7%. Unemployment for workers in the bottom wage quartile who typically work blue collar jobs such as packing shelves in Walmart or delivering groceries working for Instacar are likely above 20%. This urges economic policy especially for those who lost their jobs simply relying on embarrassingly low stimulus checks that are hard to come by to feed and support a family of 4 in middle America. Thankfully Biden is on the mission to increase the check payments if he is able to get through with the Senate and make sure big businesses donât take advantage of these checks to simply make more money the rest of Americans can put to better use.
In every recession, the economic recovery becomes uneven. While the unemployment rate for the nationâs lowest-paid workers is above 20%, it has fallen below 5% for the nationâs highest-paid workers stated Federal Reserve Governor Lael Brainard even though lowest paid workers typically work at large corporations that are always in demand such as the Amazons of the world. Yet, majority of them, especially minorities such as African Americans and Asians are more in the small business space than leading large billion dollar corporations which Main Street has been badly hurt from.
In addition to socio-economic class, race has also been unevenly affected by unemployment. The Black unemployment rate is 9.9% and the Hispanic rate is at 9.3%, while the rate for Whites is 6%, the U.S. Bureau of Labor Statistics reported.
Solution on Both Ends
Although immediate relief to get Main Street and all the 300 million small businesses back and running wonât happen overnight, the Fed has made inclusive employment gains a priority adjusting its policy to allow inflation to run higher than the previously set 2% goal and the unemployment rate to fall below the previous indicator. Higher unemployment is a good sign of a working economy even though goods will be priced at higher rates, reducing its overall purchasing power.
Even though the rich who really care about their country not fueling capitalism further want to bridge this gap and help America heal, it might be up to majority of Americans like us who are doing well to make a real change. Even if Facebook and other companies do end up paying their fair share in taxes, which is only a dream would certainly play a big effect on boosting the overall economy, we cannot expect companies to care about their employees and customers over profits in the long haul.
So how can you help?
First off, supporting your local businesses by shopping small instead of at your big box retailers who are profiting off of you during this pandemic is the easiest way to keep businesses you love afloat. I understand itâs tempting to just click a few buttons and have your overpriced toilet paper delivered at your door for no extra shipping fee incurred through Amazon the next day, but taking the extra effort to support your local drug store will not only help it survive and usually charge less for products anyway, your contributions help a lot more than for Amazon. Youâre keeping Main Street and millions of employees at work helping promote a faster recovery and inflation which is truly no better feeling.
As tax day roles around the corner, I hope you think about the millions of Americans that wish to be in your position and why you are in this country in the first place. Big businesses can easily help every American in need supplying $6k checks but choose not to because they have no heart and their best interests on the table, just like Robinhood last week, another business after all.
As always, before you help anyone else, even though this sounds like something Amazon would tell its employees, make it a conscious effort to get your finances in order first. Putting yourself first will allow you help others better. Not much to ask for when deciding between toilet paper vendors.