The Covid-19 Pandemic: What We've Learned - Slimmer Payments

The Covid-19 Pandemic: What We’ve Learned

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The coronavirus pandemic has caused economic upheaval for millions of Americans. But as difficult as crises can be, there are often lessons to learn from every kind of disaster. Here are seven personal finance lessons we can all learn from the Covid-19 pandemic.

1. Have an Emergency Fund

One clear lesson from the past tumultuous year is that more Americans should work to build an emergency fund of at least one month of spending. An accessible emergency fund, kept in an easy-to-access form like a savings or checking account, can help alleviate the need for drastic cuts in spending when facing temporary shocks to your income.

2. Exercise Financial Discipline

With many facing job loss and reduced income, the pandemic forced many to see that they could be more financially disciplined when they had to. Even if you were fortunate enough to maintain your income during the Covid-19 pandemic, the restrictions on life’s pleasures, like travel and eating out, caused all of us to rethink how much we spend on these activities. We reflected on our excess indulges and realized the value of spending moderately and saving intentionally.

3. Learn to Better Manage Risks

Many financial experts have said that one of the biggest financial life lessons to have learned from the pandemic is the importance of comprehending and managing risk. While risk is a constant in our life, we often do not ensure enough against the risks we face. We should ask ourselves: Does my family have the proper coverage in case of health problems, including the ones created by the virus? And in case we have a high-deductible health plan, do we have enough to cover the deductible? And are we covered in case someone becomes disabled? Should we change or increase our long-term disability insurance? And importantly, do we have life insurance to protect our family in case of the death of the income earner(s)?

4. Be Flexible About Retirement Planning

The economic upheaval caused by COVID-19 has caused many to have to rethink retirement planning. This emphasizes the need to be flexible about retirement. Over 80 million Americans reported that their retirement timing had been impacted by the pandemic. Most of them believe that they will need to work longer than they had previously planned.

5. Have a Will and an Estate Plan

No one likes to think about their own mortality. However, if we learned anything from the pandemic, it is that death can come at any time. Be sure you have a will and an estate plan in place for your beneficiaries. Whether you’ve built a net worth like Tony Hsieh, former CEO of Zappos (who had no will), or you are worth $10,000, it’s important for the family you leave behind to understand the wishes you have for your assets and belongings.

6. Stay Invested

When a major disaster hits, it is easy to panic and want to cash out of all of your investments. But if anything, the way the markets reacted to the pandemic should have you learn the value of staying invested. In 2020, it looked like financial markets were doomed near the end of the first quarter. We saw days where markets went down over 10%. Many investors panicked and went cash, fearing the worst. Since then, the markets have rallied. Anyone who tried to time the market and go more conservative is probably feeling regret.

7. Don’t Overlook the Value of a “Side Hustle”

Just as investment advisers recommend having a mix of investments in your 401(k) to minimize stock-market risk, it’s critical to have a mix of income sources. Many global citizens took the pandemic as a call to action and used technology to create new income streams through blogging, selling courses, writing e-books, posting video content, coaching or consulting, setting up an online shop, investing, and so much more. In the 21st century, when the majority of transactions occur digitally via the web, technological literacy is as critical as financial literacy.

What lessons in personal finance have you learned from the Covid-19 pandemic? Please reply using the comments below.

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