As things are starting to “normalise” (using that term loosely) after nearly 3 months of safer at home, I thought we should take a minute a look at some financial lessons we can all learn from Covid-19. While the Covid-19 pandemic is nowhere nearly over, we can look back on the past few months and take some learnings from what we have experienced.
Our circumstances are more sensitive to financial shocks than we think. Even if you are earning “good” money, it doesn’t take much to turn your financial situation upside-down. Many of us have vulnerabilities in our financial situation and we need to be aware of that and plan accordingly. If you have found yourself in a difficult financial situation, I have written about what to do next here – What To Do When A Financial Emergency Hits
The importance of an emergency fund. If you find yourself in a situation where you are without income or suffer a big drop income or you suddenly have a big uplift in expenses, say for example due to an illness, you will be so thankful that you have quick access to a reserve of cash. Life doesn’t go on hold when an emergency strikes and bills still need to be paid.
Protect and secure yourself by ensuring you have sufficient cash for an emergency fund. For more info on emergency funds, read this article: What Is An Emergency Fund And How Do I Get One? and if you find yourself in a difficult financial situation with no emergency fund, read more on what you can do here: What To Do In A Financial Emergency When You Have No Emergency Fund
The importance of diversified income. Having only one source of income leaves us extremely vulnerable. It means we are dependent on just one person to provide our income. Similarly, if you are a two-income household and both incomes are from the same industry, both your incomes are very sensitive to a shock in that industry.
Where possible, you should look to diversify your income sources. Diversify your income in terms of the source of it and the industry that provides it. This will make your income less vulnerable to economic shocks, industry-specific shocks, and company/organisation-specific shocks. If you find yourself in a situation where you have lost your job, I have written an article with lots of tactical and practical advice here: What To Do If You Lose Your Job.
If you have money invested and the market drops, do not touch it. I repeat, leave your investments alone. You will likely freak out when you see the value of your investment dip, but remember, you have not actually lost any money unless you lock in your losses. Said another way, until you cash out your investment you have not lost any money. So leave them alone and give them a chance to recover. It is likely they will get worse before they get better, but do not panic and cash-in your investments.
So there are 4 important financial lessons I think we should all take from Covid-19. For anyone who is interested in being financially prepared for a financial emergency, read how exactly to do that here – How To Be Financially Prepared For An Emergency.
Have you signed up for my email list yet? When you sign up you get my 16-page Ultimate Meal Planning Guide emailed to you for FREE automatically. It includes step by step instructions, tonnes of tips and, hacks to save you money and two free printables. Click here and sign up using the subscription form.