The COVID-19 pandemic lead to a huge disruption in the lives of American citizens and the world at large. We saw massive layoffs daily, unemployment numbers continue to rise and small businesses being shuttered. It’s fair to say that the entire country was caught off guard with little to no time for preparation. Even with government assistance, it wasn’t enough to eradicate the financial problems that millions were faced with.
Staying the course during uncertain times can feel like an emotional roller coaster. One day we may feel up and confident, and the next day the narrative can completely change. One crucial lesson that COVID-19 taught us is that preparation is key. Let’s explore four financial lessons that we can all take from this season of uncertainty.
Don’t avoid unpaid debts
Credit card debts, bank debts, or any other kind of debts can be detrimental in times like this, when there is job scarcity or insecurity. When you find yourself overextended financially as a result of debts, it becomes time to prioritize. Do you find yourself living from paycheck to paycheck? This means, after you are paid and all of your bills are covered, you are back to a zero balance. If so, create a plan to reduce some of your overhead expenses. Consider areas such as car payments, car insurance, credit card payments, personal loans, etc. Reduce where you can to make room for more disposable income.
The role of budgeting cannot be overemphasized. Budgeting is the best way to keep track of your financial ability. It’s the reality of what you would like to do compared to what you can actually do. Budgeting also allows you to gain a quick glance of how much income you earn and how much of that income is designated towards essential and non-essential expenses. If budgeting has been a challenging area for you, start by simply making a list of your needs and wants (don’t forget to add dollar amounts beside each). Once your list is complete, add up the total and subtract this amount from your monthly income. Start where you are and do what you can until you are able to exercise this habit with ease. The goal is to have a spending plan for your money.
Emergency Funds are crucial
Saving up for emergencies is underrated because as humans, we are often optimistic. The belief that “It won’t happen to me,” OR “I don’t need to have that much saved” are tales of the past. COVID-19 proved that we should have a plan for saving and that it should be treated as a monthly expense. Also ask yourself, “What would happen if I lost employment today?” Would you be financially prepared? Emergency funds serve as your plan B.
The pandemic has had a wide range of impacts on various aspects of our lives and businesses. One of the most important lessons that we can all take from this, is to not put all of our eggs in one basket. There are many ways to diversify investments or income. Think beyond stocks and explore other variations of streams of income. Maybe it’s time to turn your talent into a side hustle. Do something you actually enjoy while generating income.
As hard as the COVID-19 pandemic has been for so many people, remember that you weren’t in this alone. When you reflect on your personal money habits what are some areas that you would like to improve? Write this down, get back to the basics (if necessary), and get to work.
Stay the course and stay well.