As the economic expansion hits the 10-year mark around midyear, you will be reading a lot of articles about how Americans are faring financially these days compared to a decade ago.
An interesting side note is how people have changed their financial habits and practices. Not all of these shifts have been tied to the economic expansion. Some mainly reflect technological and other innovations. Some have endured for longer than 10 years and others, for less time. But they’re all in play.
You spend less time at your bank but more time dealing with it.
In some ways, banking hasn’t changed as much as you might think. There are still tens of thousands of branches, people still write paper checks and FDIC insurance stands ready to bail out depositors at failed institutions. Even cash remains a popular way to make purchases. In fact, it’s still the most common means of buying things, says a Federal Reserve study.
That said, few industries have embraced technological innovation as much as banking. You probably don’t think twice anymore about paying bills electronically, transferring money with your cellphone or applying for loans online — tasks that were mostly unthinkable a generation or so ago.
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Many consumers are spending more time dealing with banking issues — checking their statements, monitoring transactions, viewing credit scores, shopping for loan rates, moving money around — than ever before. Three in four adults engage in online banking at least once a month, according to a study by Javelin Research.
It just doesn’t seem so laborious or tedious because people don’t visit their branches or ATMs so often, though those channels are far from disappearing.
You spend less effort trying to pick stocks
Stock-picking is becoming a lost art among large swaths of the population. Investors for years have gravitated toward mutual funds and other professionally managed portfolios.
More recently, they have turned to index funds, whereby the manager isn’t trying to pick stocks either, but rather holds the same companies as found in the Dow Jones Industrial Average, the Standard & Poor’s 500 or other stock groupings.
A good example is the trend toward target-date funds, which often hold indexed portfolios and mix them in a way that’s suitable depending on an investor’s age and appetite for risk. This means higher, more aggressive stock holdings for young adults, with the mix becoming more conservative, with higher bond allocations, over time.
Target-date funds, which have become mainstays in workplace 401(k)-style plans, have swelled to $1.23 trillion in assets this year from virtually nothing two decades ago, according to the Investment Company Institute, the mutual fund trade group. They are a sophisticated yet simplifying investment that makes sense for a lot of people.
You’re waiting less time for pay
If you have a permanent, professional job, you probably haven’t noticed much change in the frequency of your paychecks. Mostly likely, they still arrive every week or two.
But if you labor in lower-income positions, including part-time “gig” jobs, the trend is toward getting pay into the hands of workers faster — often within a day or two of completing a shift. Rapid advances in bank-payment processing and cell-phone applications make this possible.
“As a society, we want everything — food, movies or whatever — in real time, so why can’t payroll be on demand, too?” asked Ijaz Anwar, chief operating officer at PayActiv, a company that facilitates instant access to earned pay as a voluntary workplace benefit.
Walmart is among the large employers offering the service through his company to some workers.
Why should employers bother with this? Because they increasingly see financial stress causing problems such as lower productivity, as workers check transactions and otherwise worry about their money.
Faster access to earned pay means cash-strapped individuals are less likely to resort to payday loans, auto-title loans and other high-cost borrowing options, Anwar said.
PayActiv also offers saving, bill paying and other options, and it allows only a portion of earned pay to be accessed daily so that workers don’t blow through everything too quickly.
“We provide the service with guardrails,” Anwar said.
You’re doing more part-time work
This isn’t necessarily a beneficial trend, but plenty of people are picking up contingency work or “gig” jobs. Sometimes, as with retirees, this extra employment might represent a desire to stay socially and mentally active. But for others, it reflects the need to earn extra money to make ends meet.
Perhaps 48 million Americans, or 31% of the nation’s workforce, fill at least some gig jobs here and there, according to an estimate by Staffing Industry Analysts. This includes not just people filing temporary shifts but freelancers and independent contractors working on specific projects or assignments.
The shift from full-time, permanent work to more contingent opportunities has an effect in areas such as retirement planning, where many people have been lagging. For example, while independent workers often are eligible to open Individual Retirement Accounts, regardless of income, relatively few do.
That’s one reason proponents of retirement preparedness see potential in the SECURE Act, which was approved this spring by the U.S. House of Representatives and appears to enjoy broad, bipartisan support.
The bill would expand access to retirement programs in various ways, including to more part-time workers. Another change would allow seniors to keep contributing to IRAs past age 70 1/2 if still employed, reflecting the reality that many people are living longer and want to — or might need to — keep working and saving.
You’re spending (a bit) less time on taxes
Federal reform that took effect in 2018 was supposed to make things simpler for taxpayers, after years of increasingly complex rules. The new goal has been met, partially.
The big simplifying change was boosting the standard deduction so that more taxpayers opted to take it rather than itemize their deductions. That means fewer expenses for people to monitor. The Internal Revenue Service estimated another 20% or so of individual taxpayers would take the standard deduction, raising the total to around 90%. (The IRS hasn’t provided actual data on this yet.)
More taxpayers are preparing their own returns, but the change hasn’t been drastic so far.
The number of self-filers rose about 2.3 million or 4% this past tax season, according to IRS numbers that focused on electronically filed returns (which represent the vast majority). Yet even with this increase, only 44% of taxpayers prepared their own returns, meaning the other 56% still hired a preparer.
Even with the simpler system, many people consider tax-return preparation a daunting task and are willing to pay someone else to do it for them. It remains to be seen if the one-year uptick in self filers becomes a more pronounced trend over time.