The Covid-19 pandemic has upended our social and economic lives in ways we could never imagine before. Losing jobs and important sources of income and business restrictions have all got us into readjusting our money habits and lifestyles.
Just as the pandemic was a wake up call in many ways, it also gave us new perspectives about financial planning that we had so far overlooked. For many of us, the importance of insurance or living on a budget had never meant so much ever before. So it is essential to glean some lessons from the pandemic and inculcate them in our lives.
In fact, now is the best time to look at our financial picture and make changes in our money management. While the times might be unprecedented and things might still be unpredictable, we do have the ability to emerge from this crisis stronger than we entered it.
Finance Lessons We’ve Learned from the Covid19 Pandemic
Here are the 6 lessons we have learned during the pandemic that we can apply to our budgets as life evolves after the lockdown.
Expect the Unexpected
If there is one phrase that can sum up the overall lesson that we have learned from the pandemic, it is to expect the unexpected. We might have thought of emergencies or unexpected expenses but what we never got a premonition for was transitioning our lifestyle to a new one.
Thus uncertain times like these make having an emergency fund an absolute essential for money management. The money kept aside in this fund can be used for any unexpected circumstances, from a medical emergency to losing a job.
Therefore, when times are good, build up your emergency fund to live off this fund when time takes a turn for the worse. Ideally, this fund should equal six months of your expenses. Make sure to consider all small and big expenses when calculating this number. Another great personal finance tip for 2020 is to put the emergency fund in an instrument that gives you a little more return, rather than sitting idle in a savings account.
Do Not Lay Odds on a Stable Income
A very important lesson that the pandemic has taught us is that relying solely and completely on stable income is actually shortsighted. From the current circumstances, we now know that no job is 100% secure, no matter how certain it seems.
Even the returns form a promising investment can take a dip and dry up completely when the global economy is sinking. Thus, relying too much on any form of stable income can leave us financially vulnerable at anytime.
Here are some passive income sources you should consider.
Do Not Put All Your Eggs in One Basket
Financial planning during the pandemic has also taught us the true meaning of the phrase not to put all your eggs in one basket. It is now an undeniable fact that a diversified portfolio is absolutely essential against stock market volatility.
A diverse portfolio spreads the risk and saves you from bigger setbacks during a time of global crisis. For example, if a majority of your investments are in the airline industry, the pandemic has likely cut down the value of your portfolio considerably. On the other hand, if you had diversified your portfolio with some pharmaceutical stocks, they would have made up for the losses in other investments.
Get Your Own Insurance Policy
Before the pandemic, relying on your employer’s health insurance was enough for most of us. And as a matter of fact, things were going pretty fine in that regard. However, during the pandemic a lot of people lost their jobs and their insurance as a result. This has taught us that relying on the employer’s insurance policy was a risky bet to begin with.
It is best to have a health insurance policy of your own to avoid burdening financial trouble during a time of global crisis. So, even when you are covered by a corporate health policy, make sure to get your own.
Pay Off Credit Card Debt as Soon as You Can
One of things that has the ability to break your financial situation is a massive credit card debt hovering in the background. The last thing you want is having to deal with it in a crisis when the interest rate is also skyrocketing.
There are only a few providers that are offering pandemic relief measures while others are freezing interest for hard-up customers. Even the assistance that is being provided is only temporary. So, take a note to pay off your credit card debt while you can and never let it be to deal with later.
Be More Mindful With Your Spending
Lastly, one of the best personal finance tips 2020 is to be more mindful with your spending. While it is easy to survive without a spending plan without an unusual crisis, when income is cutting back and uncertain, every single dollar can help you get through the challenging situation.
If you are using a budget for the first time or have just recently started using a budget again, you are not the only one. Suddenly, all of us are actively thinking about how much we are spending on weekly groceries and monthly bills. So, if you have finally learned to live on a budget, we appreciate you for learning a skill that would benefit you for the rest of your life.
The Coronavirus pandemic is a storm that very few, if any of us, saw coming. Be it lockdown, quarantine or remote working, none of it or the situation we now find ourselves in could have been wholly predicted. One unexpected shift can be essentially noticed in how we’re collectively changing our financial planning.
We have witnessed how quickly people can lose jobs and the economies can come to a halt. But more importantly, we have learned the above lessons to weather this storm or the one that lays ahead of the pandemic.
Find your financial situation during the pandemic too daunting to deal with on your own? Download the Doctor Money app and find smart solutions to money management. The trick is to put events into perspective and to hit all the curveballs that life throws at us out of the park!