The health pandemic and subsequent financial upheaval has hit the wallets of tens of millions of Americans hard, and it’s going to take a long time before everybody who has been adversely impacted recovers, according to financial thought leader and entrepreneur, Ric Edelman, during a recent The Source by DailyPay podcast.
Edelman and DailyPay both partner with the Funding Our Future Coalition, part of the Bipartisan Policy Center, to help people with modest incomes build a more secure financial future. DailyPay is the recognized gold standard in providing on-demand pay, sometimes called earned wage access. Edelman Financial Engines is the number one independent financial advisory firm in the U.S.
Because of the current predicament, people need to focus first on fulfilling rent, mortgage and car payments, as well as securing enough food and medicine,” Edelman said. “All other expenses can be eliminated, deferred, delayed.” In addition, avoid liquidating retirement accounts at work. Finally, “We need to avoid going into debt as best we can,” he said.
He also had some seemingly unconventional advice for those that are in dire financial straits, but still employed. First, “You should be adding to your retirement plan at work at least as much as is necessary to qualify for the employer match … then take whatever available cash you’ve got on a regular monthly basis and pay down your credit cards,” Edelman said.
While some would raise their eyebrows about not attacking debt amounts first, Edelman said debts take a long time to pay off regardless, while the opportunity to save for retirement is more time sensitive. Get at least the employer match to those amounts, and “don’t squander the time” to create some wealth for the future.
Next, people should build adequate cash reserves and savings. Then, funds should be applied to investments, he said.
Existing technology makes it easy to save “incredibly small amounts” and “saving pennies on a daily basis adds up to massive amounts of money over long periods of time,” Edelman said. “The ability to save and invest has never been easier. And it’s thanks to FinTech — financial technology.
In addition, “The pandemic is radically accelerating the adoption of exponential technologies … And what’s fascinating is that the adoption of these technologies is growing, not merely among Gen X, Gen Z and millennials, it’s growing among those who are Baby Boomers and Depression babies, people in their sixties, seventies, eighties, even my mom in her nineties,” Edelman said.
“If it wasn’t for financial technology, DailyPay wouldn’t be able to exist,” Edelman said.
DailyPay is a FinTech company that has developed savings tools for employees, along with its on-demand pay applications, and these tools allow employees to put their earnings into savings, before payday, in three different ways and to direct these savings to a number of different vehicles.
A recent survey, fielded after the pandemic by Funding Our Future and DailyPay, showed that those who said they are more likely to save for the future vastly outnumbered those who stated they were less likely to save, by more than three to one.
A side benefit of the lockdown is the change to the way Americans spend money, Edelman said. “We’re not going out to restaurants like we were, we’re not going to movie theaters or ballparks … many are saying, ‘I better sock it away as a rainy day fund in case this gets worse.’”
“There’s nothing like going through a crisis to help you realize, personally, that your own individual behavior really matters,” he added.
As for coming out of the crisis, Edelman said “Never bet against America. We are going to get through this, hopefully sooner rather than later.”
For additional resources on this topic, see:
- Measuring DailyPay’s Impact in Times of Crisis
- Survey Says: COVID-19 is Motivating More People to Save for the Future
- 10 Easy Money-Saving Tips All Gen-Z’s Should Know