It’s trivia time at Vicinity! Which of the following headlines from the past year are real?
- Aliens in hiding until mankind is ready, says ex-Israeli space head
- Invasive wasps are posing a serious threat to passenger planes, study says
- Makers of grow-your-own human steaks say meal kit is not ‘technically’ cannibalism
- Growing anxiety has been linked to a reduction in coffee consumption
If you guessed A,B, and C, you would be correct. And if headlines are any type of indicator for what kind of year it was, then it’s safe to say we all dealt with a lot of crazy in 2020. Many of us were put in a juggling act of work, school, finances, kids, roommates, pets, neighbors, and the list goes on…last year was a mixed bag of emotions, to say the least…
It’s important to separate factors we can control from those we can’t, particularly during uncertain times. There are external circumstances we have no effect on. But a few things we can control: our attitude (thanks, Swindoll), our personal choices, and our resources. If we’re talking financial resources, many people (and businesses) took serious financial hits during 2020.
PwC puts out a Financial Wellness Survey every year and, for 2020, more than a few of the stats were sobering:
I’d say 2020 was an “Emergency Expense” type of year. Equally alarming is that many people are assuming they will have to make early withdrawals from their retirement plans (over 50% for Gen Z and Millennials). The number one reason for these withdrawals is “to deal with an unexpected expense” (2020 in a nutshell for a lot of folks).
When we think about what we can control, one direct action we can take to mitigate financial risk is to diversify our income streams. For some, that means starting a side hustle. The gig economy has boomed over the last decade thanks to companies like Airbnb, Uber, and DoorDash; freelancing is another popular way to make some extra cash, particularly in today’s world where remote work is the norm.
Probably the most well-known way to diversify your income stream is through investing. People invest in funds for potential returns, but these dollars ultimately end up in massive global companies. Most people don’t know where their investment dollars are ultimately ending up.
This “ignorance is bliss” trend is changing thanks to our access to information and collective moral conscience. This increased awareness has led to a massive increase in ESG (Environmental, Social, and Corporate Governance) investing, where investors care not just about the financial returns, but the societal and environmental impact of their dollars. The OECD estimates that ESG investment funds exceed 17.5 trillion dollars globally. However, there is still an amount of uncertainty when it comes to where the funds are going; at Vicinity, we believe the “no BS” way to find clarity with investing is to zoom in (not out).
Microinvesting in local companies is possible thanks to FINRA-licensed portals. These investments have some similarities with traditional investing— potential returns and assumed risk—but they can also have a positive impact on small businesses and lead to change in local communities.
Moving towards diversified income and building a strong local economy don’t have to be separate activities. There’s an incredibly disproportionate and nonsensical funding gap between large companies and small businesses. It’s time to balance the scales. Vicinity is helping a new class of investors plan for the future of their bank accounts and their communities.