5 Personal Finance Lessons learned from COVID-19
We are halfway through 2020 so is our fight with COVID-19 but this crisis so far has dealt a huge blow to the economy — pay cuts, displaced workers, reduced income and generally, life on a standstill.
The changes caused by the virus have already taught us few fundamental lessons in our personal finances. The pandemic has hit our wallets hard and became an eye opener in our real financial situation. Here are 5 financial takeaways from COVID-19 crisis which can help us move forward and be better in our finances:
Lesson # 1: Establish an Emergency Fund
In times of uncertainty, there’s nothing probably more important than having an emergency fund at your disposal. The rule of thumb is to have an emergency fund that would cover 3 – 8 months’ worth of expenses. Having an emergency fund is one of the core of financial planning. It gives you another layer of confidence and the importance of expecting the unexpected such as COVID-19 pandemic, job loss, illness, accident, etc.
Lesson # 2: Learn how to do budgeting
There is too much uncertainty in the midst of the pandemic that’s why keeping account of every expense you make is very important. Having a budget helps you prioritize the most important spending such as essentials down to the least important one, especially at this unprecedented time where resources are limited. Regularly tracking your expenses help you avoid running out of money and always have ample cash on hand.
Lesson # 3: Health insurance is a must
This pandemic is probably the perfect time to remind us to get that health insurance that you’ve been delaying for so long. Even if your employer provides one as part of your employment benefits, it’s always better to have your own insurance as insurance offered by your company will cease once you leave the company or worst, layoff or job loss.
Lesson # 4: It’s always good to have additional stream of income
A sudden job loss may put your finances in danger. Unfortunately, monthly utility bills and other necessities are non-stop and will always continue whether you have income or not. During these times where recession is inevitable, a second source of income will come in handy. It can be a small business or a part-time job or selling your old stuff — some good examples to earn extra cash. These things will help you make the ends meet and tide over difficult times.
Lesson # 5: Reevaluate your budget and financial plan
COVID-19 has put the world on a standstill. Many of us are locked down in our homes and forced to stay indoors. Our limited activities give us the time to reevaluate our budget and financial plan. By learning how to budget, we will be able to see the unnecessary spending that eats out our finances. Most of us probably have more time to cook in our home and eating out less which helps us save some bucks. Some people do their exercise at home instead of hitting the gym due to the pandemic. All of these might be an opportunity for us to consider lifestyle change like eating home-cooked meals and cutting down gym spending to improve your financial health. Everybody’s experience is unique and each of us has a story to tell. This extraordinary time has reminded us of what’s really important to us.
The coronavirus has turned the world upside down and changed everything in a snap. We have different ways to cope, different experiences, and different stories to tell. In the face of uncertain future, reflecting in our lives and in our finances and having a sound plan afterward will help us get through this pandemic and be better than before.