By Kelley Muhsemann
Marketing Manager
Do you ever feel like the economic news you read just doesn’t match your personal financial experience? You’re not alone. This phenomenon, termed “vibecession” by economic commentator Kyla Scanlon in June 2022, captures the growing disconnect between official economic data and our personal financial experiences. While numbers might show a booming economy, you might still feel a pinch in your wallet. Let’s explore why this happens and what it means for you.
What is a Vibecession?
“Vibecession” is a blend of “vibe” and “recession,” suggesting that even without a technical recession, it feels like we’re in one. Despite low unemployment rates and rising GDP, many people are still experiencing financial stress. Here’s why:
- Rising Costs: Even with stable jobs and incomes, the cost of living is increasing. Housing, healthcare, education, and everyday expenses are climbing, making it harder to stretch your dollar.
- Stagnant Wages: Wages aren’t keeping up with inflation. You might be earning more in nominal terms, but when adjusted for inflation, your purchasing power hasn’t grown much.
- Economic Inequality: Economic growth often benefits the top earners more, leaving the average worker feeling left out. This creates a sense of disparity, even in a growing economy.
- Job Insecurity: The gig economy, part-time jobs, and lack of benefits contribute to feelings of instability, despite overall low unemployment rates.
Why the Gap in Perception?
Why is there such a gap between the data and how we feel about our finances? Here are a few reasons:
- Aggregate vs. Individual Experience: Economic data is often aggregated, showing a broad picture that might not reflect individual experiences. While the economy grows, you might not see those gains in your personal finances.
- Lagging Indicators: Economic reports often lag behind real-time experiences. By the time data is published, it might not accurately reflect current conditions.
- Psychological Factors: Media reports, personal anecdotes, and overall sentiment heavily influence perception. Even with positive data, negative news can shape how we feel about the economy.
What’s Contributing to the Current Gap?
Today, several factors are widening the perception gap.
- Inflation: Even if wages rise, the increasing cost of goods and services can outpace income growth, making it feel like you’re losing ground.
- Housing Market: For those with significant real estate investments, fluctuating housing markets can create uncertainty, even if overall home values remain high.
- Healthcare Costs: Rising healthcare costs impact everyone, and even high-income households feel the pressure of unexpected medical expenses.
- Market Volatility: Unpredictable stock market movements can particularly impact unmanaged or unmonitored investment portfolios, causing significant unease even during generally strong economic periods.
What Can Be Done to Bridge the Gap?
Bridging the disconnect between official economic data and personal financial experiences is a multifaceted challenge that requires efforts from both individuals and institutions. Here are some steps that could help:
- Policy Changes: Policymakers should consider not just economic growth but also factors like the cost of living and job security when making decisions. They should also regularly review and update the methods used to collect and report economic data to better reflect real-world experiences.
- Transparent Communication: Clear communication about economic conditions and educating the public on how to interpret data can foster a more accurate understanding. Compelling the media to focus on relatable stories that connect economic data to everyday experiences, and avoiding sensationalism to provide balanced reporting on economic issues can help bridge the perception gap.
- Support Systems: Strengthening social safety nets, like affordable healthcare and accessible education, can alleviate financial stress. Local governments and nonprofits could develop and support community programs that provide networks for the public to share financial experiences and advice.
- Personalized Financial Planning: Advisors should tailor advice and strategies to the unique circumstances of each client and utilize technology and data analytics to provide more personalized insights and projections. Breaking down complex economic concepts into practical advice is also ideal.
The concept of vibecession reminds us that numbers don’t tell the whole story. Remember, money is emotional. It’s easy to make financial decisions based on vibes and emotions, but that can often lead to poor outcomes. By acknowledging the gap between official data and personal experience, we can work towards a more inclusive and accurate understanding of economic health. Most importantly, don’t let vibes or emotions deter you from the goals and plans you have created.
Our team at R.W. Rogé & Company, Inc. understands the emotional aspect of money, and we’re here to help you make informed, rational decisions. We remain committed to understanding and addressing the financial realities faced by our family of clients. Our team-based approach and dedication to personalized, fee-only financial planning ensures that we are always acting in your best interest as a fiduciary, helping you navigate both the official economic landscape and your personal financial journey. If you have questions about your financial life or the current economic landscape, contact our team of CERTIFIED FINANCIAL PLANNER™ (CFP®) professionals at 631.218.0077 or click here to get started.
R.W. Rogé & Company, Inc. is an independent, fee-only financial planning and investment management firm serving clients locally and virtually across the country, with Long Island, New York, Beverly, Massachusetts, and Naples, Florida office locations. R.W. Rogé & Company, Inc. was founded on a “client first” culture and proudly commits to acting in your best interest as a fiduciary. We have helped clients Plan, Achieve, and Live® the life they want since 1986. To learn more about how we do this, click here.
