Money Matters

by Carly Murray | Nov 7, 2023

While the country has experienced economic disruptions, recessions and instability before, none have been like the circumstances following the peak of the COVID-19 pandemic. The harsh truth is that money is everything; while it might not buy happiness, it keeps the utilities on, families from starving and a roof overhead—and with inflation at its highest in decades, working-class Americans are increasingly panicked about simply surviving.

But the economy once again persevered, and in some ways strengthened in the midst of adversity via solutions that are actually more effective than before, and businesses that adapted out of necessity these past few years are seeing continued success. Technology providers, for example, are in high demand and will continue to be thanks to being an increasingly integral role their products play in modern companies’—and nearly every individual’s—daily functionality, while home renovators especially thrived during lockdown while everyone was isolating.

Similarly, solutions to an industry’s specific economic challenges can also assist the general population, especially if a marketable necessity is provided in accordance with the current state of the world. Local health care, in particular, helps residents by not only treating their medical ailments but also bolstering the regional economy.

“In the Philadelphia/South Jersey area, we have a tremendous amount of hospitals and health care … it definitely is a major economic factor. And health care by and large has done well coming out of COVID because [of] people who postponed non-life threatening surgeries,” says John Torrence, managing partner at Masso Torrence Wealth Management, Inc. “We represent a lot of orthopedic groups; since the end of COVID, they have never been busier, because the people who put off a knee replacement, hip replacement, shoulder surgery, well, now they're all getting that done and have been for probably the past 18 months. I think what drives the South Jersey [and] Philadelphia region is just that we have a disproportionate amount of health care providers, and we seem to attract people both locally and regionally. People come to Philadelphia and South Jersey to get a Penn Medicine experience if that's not feasible for them in other areas.”

However, an industry’s success during economically dire times isn’t necessarily indicative of individual community members’ finances. Ultimately, while services and products like health care and technology can be beneficial both to consumers and as advantageous investments, the costs are rising to levels that were unfathomable only a few years ago.

The cost of one industry in particular is actually psychological through its success and high demand: technology, and particularly, artificial intelligence. Technology in 2023 is every organizations’ main focus and asset, and it is also an essential part of everyday life for consumers. Financial experts, too, are finding it valuable to implement the latest technological developments.

“Our members expect the latest online and mobile technology to manage their finances, and also expect the latest in digital payments technology, so we have to ensure that we continue

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to invest in those areas. That said, as a credit union, we continue to live out the philosophy of ‘people helping people,’ and thousands of our members still utilize our branch locations throughout South Jersey to receive personalized service from our staff. In the coming year, we are creating a digital branch so that our members can seamlessly navigate between digital and branch delivery, to best meet their needs,” explains Mike Dinneen, president and chief executive officer of First Harvest Credit Union.

As technology evolves and expands, its capability to perform typically human tasks increases in both efficiency and accuracy—if implemented correctly. Artificial intelligence specifically has ignited conversations exploring its potential in everything from saving lives to making some professions obsolete.

“You do see companies automating certain functions that used to be done by a live employee but they've made the decision that, from a monetary standpoint, investing in the technology in the long run is cheaper than the employee at current prevailing wages,” Torrance says. “I think on a grand scale, artificial intelligence is going to revolutionize not just certain parts of technology, but quite honestly certain parts of medicine. There are companies using artificial intelligence to be able to fast-track performance pharmaceuticals far quicker than we've ever had in the past. In other words, what used to take years of experimentation, AI can basically perform in a week and have raw data suggesting that this would be the way to go, where normally that would be trial and error.”

Although there are justified concerns about technology replacing employees, it can be viewed through a more favorable lens. Younger generations beginning their professional lives have grown up with technology that’s now a second nature for them to navigate, and the correlating creation of new technological opportunities both suit those young adults’ skills and are in sync with the natural evolution of the economy. Ultimately, socioeconomic developments should be expected throughout generations, and it is most prudent to embrace or at least work in tandem with these changes. Considering South Jersey’s vast healthcare industry, there are a plethora of local opportunities for tech specialists.

Despite the potential advantages a tech-savvy young workforce offers, many of those young adults are facing the prospect of never owning a home. The housing market, as nearly all of the experts South Jersey Biz spoke with agreed, is so affected by high inflation that homeownership is unobtainable to the average resident, especially those just starting their careers and accumulating capital. This is only magnified by recent census data that New Jersey is the third-most expensive state for homeowners; however, there is hope that today’s and tomorrow’s generations will have some assistance in affording their own housing without wealth, luck or military benefits.

“The housing shortage in our region is creating a backlog of potential homebuyers; however if the Federal Reserve does indeed lower rates at the end of 2024, we anticipate that may open up housing inventory and make home-buying slightly more affordable, especially for younger adults,” says Dinneen. “We recognize that emerging adults today have more financial challenges than any emerging generation in recent memory, including stifling inflation, lack of affordable housing and student loan-debt challenges. We work to provide free financial wellness programs to our student and young-adult members, and we encourage them to use a credit union. Our loan rates and deposit accounts tend to be more affordable than those at traditional banks, as well.”

In the meantime, families are implementing tighter budgets and making more sacrifices as the cost of solely surviving has many Americans living paycheck to paycheck. In preparing for the worst, the panic such living conditions inspire can be redirected toward finding some peace of mind in proactively planning for future unpredictable situations. That planning and preparation, plus an extra dose of caution, is some of their most frequently suggested advice to clients and households feeling the financial pinch that comes with an increased cost of living.

“I think you have to be prepared for some bumpy things along the road. So, it might not be a bad idea to be slightly more cautious over the next six to 12 months, but look for the things that you want to participate in and just gradually add it in small pieces. But if it's money that you'd absolutely, definitely need in a year, two or three, I think you really want to be much more cautious and protective and buy Treasury bills and certificates of deposit and money market things and insurance companies, short-term pieces of paper that give you a high rate of return and guarantee the money back within a two or three or four or five year period. But everybody's different, there's no right answer for everybody,” advises Stan Molotsky, president and CEO of SHM Financial.

While not everyone can readily invest or put aside their funds, researching all of their options may result in the perfect plan for a particular situation.

“They're making a livable salary, but they have to be careful when they put that money into a 401(k) plan and what they're putting it into, just what specific investments they have … it's a matter of sitting down saying, ‘Okay, if I don't do this, what else can I do?’ But because you have to prepare for a retirement of some kind, you get some sort of stipend, you get some sort of pension, but the 401(k) is where you want to max out,” Molotsky continues. “But if it's not in situations that are attractive, you're better off not doing it and doing it on your own and getting the benefit of picking on your own on a much more cost effective basis. It's always easier to check off that box to have it deducted from your salary … But sometimes by spending a little more time, you can do an awful lot better and save a substantial amount of money on the internal fees that you're being charged.”

As class divisions rearrange, they also have become more evident in the modern era of social media influencers and reality television. People who struggle to put food on the table are increasingly disconcerted with the idea of excessive wealth and are turning away from the previous idealism of material possessions. Now that the world has witnessed fear and uncertainty on such a massive scale, excessive displays of wealth from celebrities are met with cynicism instead of envy. Individuals and families aim to be more careful with their purchases and investments, and therefore the demand for frivolous purchases has majorly declined, causing related businesses to close up shop.

“You may be putting all your money towards housing and your shelter, your transportation and, of course, your health. So, that may be reducing the amount that people can spend: Because the food budget is so high, they’re not going out to dinner as much. I think people are discretionary spending, maybe reducing their vacation time, or reducing some of the items that they're buying,” says Mark Wander, a CPA and founding partner of Baratz & Associates. “Bigger purchases will be curtailed. Make do with your computer a year longer, your phone a year longer or two years longer, until inflation is modified for everyone and people aren’t impacted by pricing.”

The very nature of the economy is codependent, meaning that both businesses and consumers are affected while also impacting each other. Inflation is an example of this sort of domino effect, as businesses struggle to balance their profit with their cost of production, and those ballooning costs in supplies are reflected in a customer’s bill. Some companies cannot keep up with this ratio, as at a certain point, people will not pay a doubly or triply increased product or service that is typically easily affordable and accessible.

“The margin is actually down fairly significantly because they can't afford to pass the [full] cost on to the shopper. Their margins go down, even though you might be paying significantly more for every item that you get in your weekly supermarket run. Same thing with restaurants—you may pay more than you ever did to go out to dinner. But the restaurants are actually making slightly less than they did not that long ago because they can't afford to pass on 100% of the food cost to the consumer because they do worry … nobody's going to pay $25 for pizza,” says Torrence.

The best defense against a turbulent economy is to arm oneself with financial knowledge, adequate planning and a trusted advisor. A proactive approach for the remainder of 2023, the new year and into and the future is both taken and suggested by economic professionals.

“I think in summary, the biggest problem collectively is the complacency of the majority of people just not willing to realize that things are in a state of flux,” says Molotsky. “There's just so many moving parts that it's impossible to just sit back and hope for the best, which is what we always do, but our end game is to prepare to protect against the uncertainty.”

While dealing with one’s financial future may be daunting, unpredictability and risk are common. However, whether investing, saving or spending, wise choices are not guided by personal instinct alone.

“Always put money aside for yourself but learn more about whatever you do; make yourself better and learn as much as you can. Knowledge is certainly a powerful tool
to really read and inquire about yourself,” Wander adds. “And if you have personal finances, read about personal finance. Don't talk to your friends because they might have bad advice. You have to read on your own; invest time in reading.”Consulting with an experienced professional while making the decisions best suited to one’s unique circumstance can provide relief during further economic disruption. In a more optimistic mindset, the best case scenario of planning is potential affluence during economic expansion in the future.

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Published (and copyrighted) in South Jersey Biz, Volume 13, Issue 10 (October 2023).
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Author: Carly Murray

Money Matters

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