In futile attempts to forecast the future, the financial world is obsessed with making obtuse extrapolations from myriad data points, which are then packaged up and offered as the latest and greatest analyses of financial markets for your viewing pleasure. To add insult to injury, the media adds to the mania by latching onto the most fervor-inducing snippets and bandying them about as sure things. Almost daily, you can tune into your financial news station of choice to hear the latest rendition of “the sky is falling” or “this time it’s different,” depending on which direction the stock market is heading that particular day of the week.
So what’s a normal person to do? Get caught up in the frenzy? Ignore the media and lapse into blissful unawareness of what is transpiring in the greater world? Neither option sounds very appealing or productive.
Instead, my friends, I offer up a third option: seek out the frameworks and foundational knowledge to make informed, conscious choices while managing your money.
To be clear, I am not discrediting the notion that the fundamental economic data points can give us hints and clues as to what will transpire in the future. The data points certainly can support or disprove theories. I am simply saying we should not lose our minds and frantically scurry to make micro-adjustments to the strategies and tactics we are using to manage our money to repeat the process again on the morrow as data points fluctuate and the financial markets perform their day-to-day gyrations in response to fervored minds. The path to financial success is stepping back, remaining objective, and playing the long game.
The Five Super Trends to Watch to Manage Your Money Wisely
Contrary to the noise generated by the release of various economic indicators, there are five overarching super trends that have outsized impacts on the future financial solvency of families.
#1: Extending Lifespans (a.k.a. Longevity)
Let’s give a big round of applause to the healthcare industry! Due to innovations in healthcare and technology, we are living longer than ever before. At the beginning of the 20th century, according to what data is available, the average life expectancy was about 32 years of age, worldwide1. In 2021, the average life expectancy worldwide was 71 years of age2. We have gained an additional 39 years, on average, to spend in the company of those who brighten our days and in pursuit of endeavors that matter most to us.
#2 Growing World Population
Over the last two centuries, the human population has increased sevenfold. While the current era is characterized by declining fertility rates that will serve to keep population growth in check, it has been determined that we add about 82 million people to the world population each year3.
As the world population increases, our demand for natural resources and impacts on the environment, also, increase. It has been found that developed nations produce a greater amount of CO2 emissions than emerging nations, which could be linked to the increased consumption of resources by the people that lived in the developed world4.
#3 Increasing Inflation
While inflation is in the limelight as of late, historically, inflation has been trending upwards. Examining the Consumer Price Index data from the Bureau of Labor Statistics shows that, from 1914 to 2019, inflation averaged 3.23% with a variability of +/- 4.8%. Put in dollar terms, it would take about $25 of 2019 money to buy what $1 would have purchased in 1914.
#4 Downward Trending Personal Savings Rates
Setting aside the upward tick in personal savings rates, the amount of money that people save out of their income after taxes, during the shutdowns of the COVID-19 pandemic, personal savings rates have been declining over the past several decades. Looking over the data from the Bureau of Economic Analysis5 shows that the personal savings rate peaked in the 1970s at 12.21%, and the average personal savings rate from 1959 – 2022 is 8.86%.
More recently, the personal savings rate averaged 4.59% from 2000 – 2009 and 7.29% from 2010 – 2019. Apparently, the Great Recession encouraged people to increase their level of savings which is well and good, yet, historically, the personal savings rate has been decreasing as time goes on.
#5 Government Spending on Healthcare is Increasing Faster than the U.S. Economy is Expected to Grow
Government spending on healthcare is projected to increase at a rate faster than the economy is expected to grow primarily because of an increase in recipients of Medicare, our nation’s healthcare program for people age 65 or older. National healthcare expenditures are estimated to increase 1.2% faster than economic growth (GDP) between 2025 and 20306.
These five paradigm-altering trends are the reason we, at Sol Spyre, are critically examining the foundations of the conventional financial “rules of thumb” to separate the timeless truths from the irresponsible delusions passed off as sound financial advice.
How These Trends Impact Your Financial Circumstances
The facts show:
- People are living longer.
- The human population is straining our environment.
- Inflation is omnipresent.
- Healthcare costs are increasing.
- Personal savings is following a downward trend.
- Government spending is increasing.
What does all of this mean for you?
- You will live longer than you think you will.
- Longer life expectancies mean an increasing world population increasing the strain on our natural resources, and increasing the need to focus on environmental and social sustainability.
- Inflation is going to decrease the purchasing power of the money you save, so what you’ll get for a buck will be less in the future.
- Healthcare costs are increasing as a result of technological advancements in the field of medicine, so you’ll be spending more to maintain your health in the future.
- Increasing government spending will require choices to balance the national budget and decrease deficits. Those choices will come in the form of policy modifications, such as decreasing available benefits and coverages or increasing the amount that people contribute either in the form of taxes, premiums, or upfront costs like healthcare deductibles.
We are living longer than we think we will, the money we save and invest will buy less in the future due to inflationary pressures, more of our money will go towards maintaining our health, and the government will be as cash-strapped as we are.
What Can You Do to Mitigate the Risks?
Now is not the time to rest on your laurels. Now, is the time to take proactive action to shore up your financial foundations and ensure the viability of your future security.
- You’ll need to save and invest more than you might believe.
- You need to invest those savings wisely in securities that allow you to reach your goals while preserving the natural beauty and resources of our planet for generations to come.
- You’ll need to craft your overall life strategy with a focus on sustainability and a long-term view.
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1 Max Roser, Esteban Ortiz-Ospina and Hannah Ritchie (2013) – “Life Expectancy”. Published online at OurWorldInData.org. Retrieved from: ‘https://ourworldindata.org/life-expectancy’ [Online Resource]. Fig. Life expectancy, 1543 to 2021 Sources: UN WPP (2022); Zijdeman et al. (2015), Riley (2005). ‘https://ourworldindata.org/grapher/life-expectancy?tab=chart&country=JPN~GBR~IND~ETH~OWID_WRL~KOR~ZAF~USA’
2 Ibid.
3 Max Roser, Hannah Ritchie, Esteban Ortiz-Ospina and Lucas Rodés-Guirao (2013) – “World Population Growth”. Published online at OurWorldInData.org. Retrieved from: ‘https://ourworldindata.org/world-population-growth’ [Online Resource]
4 Mayer, Melissa. “What Are Environmental Problems Due to Population Growth?” sciencing.com, https://sciencing.com/environmental-problems-due-population-growth-8337820.html. 4 January 2023.
6 “National Health Expenditure Projections And A Few Ways We Might Avoid Our Fate”, Health Affairs Forefront, March 28, 2022.DOI: 10.1377/forefront.20220324.48476
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