Believe it or not, you’re probably richer than you were in 2019. Here’s why


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U.S. households saved an extra $2.5 trillion between March 2020 and January 2022, according to the latest report by The Hamilton Project, an economic policy initiative within the Brookings Institution.

Households built up this “excess savings” — roughly defined as the amount over and above what households would have saved if the pandemic hadn’t happened — because they spent less during the COVID-19 pandemic and received three rounds of federal stimulus checks sent out between April 2020 and March 2021, according to the report. Households also saw an increase in wealth driven by rising stock and real estate prices.

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Wealth gains by class

However, the pandemic didn’t create extra riches for everyone. Households with the lowest incomes saw the smallest wealth gains, in part because lower income groups are more likely to be renters rather than homeowners, the report finds. Instead of benefiting from the recent appreciation in housing prices, these households faced significant increases in rents.

“Those who were able to work during the pandemic did well,” says Nadine Marie Burns, certified financial planner and CEO of A New Financial Path in Michigan. Employees who work from home saved the money they would have spent on gas, lunch, and coffee. “But those who were forced from the workforce are those who fell behind,” she says.

Don’t let that extra cash burn a hole in your pocket. We asked experts how to take advantage of any extra savings and how to catch up if you haven’t made financial gains in the last two years.

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1. Use the money to meet financial goals

Rather than spending your new savings on something like a new car, think about how you can apply that money to your retirement fund or a college tuition fund for your children, says Matthew D. Gelfand, certified financial planner and executive director of Tricolor Capital Advisors Maryland. If you buy a new car but your extra savings is gone, he says, “It’s much more prudent to say, I have $50,000 more, so let me look at how much new wealth I accumulated and how that can impact my plans for the future,” he says.

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2. Build a robust emergency fund

Take a hard look at where your income came from during the last two years: Did you provide for yourself, or did you rely on stimulus payments and unemployment? If it’s the latter, use the extra savings to create an emergency fund, says Daniel M. Yerger, certified financial planner and president of My Wealth Planners in Colorado.

The federal government offered unprecedented economic support during the pandemic. “If something happens in the next five to 10 years that affects employment, we might not see the same appetite for significant economic stimulus payments,” Yerger says. It’s best to have a large nest egg saved up in case the government isn’t as generous in the future.

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3. Adjust to inflation

“As things open up and inflation kicks in, the extra savings people have might not persist during the next couple of years as we return to pre-pandemic spending,” Yerger says.

Many of us have a pent-up desire to spend money because we haven’t traveled in two years or eaten out in restaurants very often. “As we get back to something resembling pre-pandemic times, we may go out and spend money,” he says. With increased inflation and rising prices, we may have to spend more to get the same products and services we’re used to buying, Yerger says. “Our purchasing power has declined, so our extra savings could be depleted,” he adds.

Gelfand agrees that most families will go back to their pre-pandemic spending levels, but what households spend money on will probably change. “It’s much more acceptable to work from home for part of the week therefore we’ll be spending less on commuting costs, clothes, dry cleaning, and lunch and coffee out,” he says. It may be possible to keep some of your savings, if you’re mindful of what you’re spending money on.

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4. Recalibrate your financial plan

If your household didn’t make any financial gains, the best thing to do is adjust your financial plan to reflect your new circumstances, Gelfand says. “You can’t change the past, but you can adjust your financial plans,” he says.

If you need to catch up, Gelfand recommends a three-legged plan that includes working longer than you had planned, spending less money now and saving more money for retirement. “Those are tools that can adjust your financial situation,” he says.

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