When COVID-19 was first declared a pandemic, the word “unprecedented” was thrown around a lot. It means unexpected, or never done before. And that’s exactly how it felt, and in many ways, still feels. It seemed totally unlikely in our modern world. And yet, it happened.
For many people, their finances in particular were not prepared for a pandemic. It showed people just how unprepared they were for a sudden loss of income. So what should you take from this experience, and how can you prepare for the next unforeseen situation?
Here are four money lessons to take with you from this pandemic:
1. Takeaways from the pandemic: Expect the unexpected
Preparing for a rainy day isn’t exactly fun. We would all much rather put money toward a Caribbean vacation than stash it in an emergency fund. But when COVID-19 hit, so many people were left with little to no savings to cover them when they found themselves with less, or no, income.
Expect the unexpected. Plan for it. Prepare for it. It’s going to happen. Whether you need a new roof, a new job, or surgery, at some point you will need to pay for something you didn’t foresee.
Check out these posts for more information on building a sufficient emergency fund:
2. Prioritize your spending
It’s been a little over a year of staying in, avoiding travel, and missing out on social events. Now that you have the opportunity to get out a little more, make sure you’re doing so consciously.
It could be very easy to blow your budget on trips and nights out because you’ve been cooped up. You don’t have to live the rest of your life like you’re still in quarantine, but be careful of the urge to live like it’s the roaring twenties again.
The best way to prioritize your spending is to plan ahead. Set a budget, determine what you can responsibly spend on fun, and go for it. As with everything in life, balance will be key.
Here are more tips for setting the best budget for you and your family:
3. Evaluate and diversify your portfolio
Some investments really paid off during the pandemic, while others flopped. However your portfolio performed, the lesson is the same: things change. Constantly.
Evaluate how your portfolio performed, but don’t make hasty decisions because of that. I tend to recommend that investors play the long game. Avoid chasing quick returns, because they don’t usually work out over time.
So whether your portfolio suffered or thrived in 2020, try not to overhaul your portfolio because of it. Take some time to see how things pan out throughout the year, and rebalance as needed.
4. Pay attention to how you spend your money
The pandemic, and 2020 as a whole, pulled back on the curtain on many businesses. We learned more about what they represent, what their policies are, and how they treat their employees, customers and the environment.
We also saw the importance of supporting your local businesses, and how communities can rally around their small business owners during challenging times. The pandemic showed that where you spend your money matters, and really does make an impact on people’s lives.
Major events like the COVID-19 pandemic shape our world in ways that are big and small. They force us to reassess how we’re living our lives, and what might need to change. The same goes for your finances.
2020 affected us all in different ways, and the best thing you can do is to look at what areas of your life were challenged the most by these abrupt changes, and figure out how to reinforce them before the next crisis comes.
About Your Richest Life
At Your Richest Life, Katie Brewer, CFP®, believes everyone should have access to financial resources and coaching. For more information on the services offered, contact Katie today.