The COVID-19 pandemic will be remembered as an unprecedented time in history. Not only has it been challenging both physically and emotionally, but it has also been very difficult financially for many people as well.
According to the Pew Research Center, nearly 4 in every 10 Americans say they have taken a pay cut, been laid off, or live with someone who has. That means families from all income levels who were dependent upon two incomes or who have never been unemployed previously suddenly found themselves financially compromised in ways they never thought imaginable.
We unfortunately can’t go back and change the past. But we can certainly learn from everything that’s happened and use it to make ourselves stronger. With that said, here are seven valuable lessons we can all take away from the COVID pandemic to be better prepared financially for the future.
1. Health insurance is Absolutely Essential
There’s no getting around it – health care is expensive! Over the past decade, the cost of premiums has gone up so much that it’s left many people wondering if it’s worth the cost or if they could forego it altogether.
However, after this pandemic, that likely won’t be a risk you’ll want to take. According to cost analysis data from FAIR Health, the average cost of hospital care for COVID-19 patients without insurance or those who were out-of-network was:
- $51,389 for 21 to 40-year-old patients
- $78,569 for 41 to 60-year-old patients
If you’re not already insured or are purposely avoiding getting insurance because you think the copay is too expensive, then you might want to consider these numbers. The bad thing about medical care is that by the time you need it, it’s too late to apply for coverage. So do yourself a favor and start looking into affordable plans now using HealthCare.gov or consider switching to a new employer who will pay more of your premiums.
2. You Really Do Need an Emergency Fund
For years financial experts have preached that we should all have 3-6 months’ worth of expenses stashed away in case we run into a problem or lose our jobs. But the reality is that most people barely have anything saved. In fact, a survey from Bankrate found that 61% of Americans couldn’t handle a $1,000 expense if one came up.
Now that COVID has shown many people that job loss is a very real possibility, it might be time to start investing in your emergency fund. You could do this by setting aside something like $50 or $100 per paycheck, or you could put aside your next bonus or income tax refund. Even if you save up a minimum of $1,000, you’ll be better prepared than before for whatever life decides to throw at you next.
3. Market Risk is Real
The stock market bull run that’s been in full swing since the end of the Great Recession has made it very easy for many people to get into investing. Without any experience or knowledge, those who contributed to their 401k plans or investment portfolios had the luxury of watching them swell year over year.
But with the stock market, there is no reward without risk, and COVID reminded us all about this important lesson. After the Dow Jones reached 29,551 points in February 2020, it then sank all the way down to 18,591 by March 23rd. That’s a drop of almost 37% in just over a month!
If you invest in all stocks or stock-based funds, then you might not be doing all you can to protect your nest egg. Diversify your asset allocation by looking into other alternatives such as bonds, real estate, precious metals, etc. Classically, during turbulent market times, these types of assets will help hedge against your losses.
4. Debt Doesn’t Just Go Away in Bad Times
When COVID caused people to lose their jobs and become short on cash, they quickly found themselves between a rock and hard place. Even though the whole world was experiencing these hardships, that didn’t stop bills like mortgages, auto loans, credit cards, and other debt from being due.
There’s no easy way to deal with debt. The longer you prolong it, the more interest or fees you’ll be hit with and owe to your lender later on. That’s why the best way to tackle it is to face it head-on.
Try using popular debt payoff strategies like the Debt Snowball and Debt Avalanche to accelerate your payoff as quickly as possible. Or if you can help it, avoid taking on any new debts. The less you owe to others, the more you’ll be in control of your money.
5. Your Career Choice May Not Be as Robust as You Thought
When the first reaction to COVID in early 2020 was to shut down the economy, this caused thousands of businesses to go into uncertainty. As a result, millions of people filed for unemployment; some for the first time in their lives.
If you were one of these people, then you may want to consider making a career change. Look into jobs that are recession-proof such as those in:
- Health care
- IT
- Utilities
- Education
- Government
- Etc.
Even if you need to go back to school and get a different degree, it may be worth the investment if it makes your job invaluable during whatever the next big thing does to our economy.
6. Two Sources of Income are Better Than One
Similar to your investments, one of the best ways to ensure that money will continue to come in is to diversify your income streams. By doing so, it will put less stress on your job and give you more control over how much money could potentially be earning.
To get more than one income stream, you could always pick up a second job. But in the digital age, most people have found it more convenient to take up a side hustle. Side hustles could be anything such as freelance writing, delivering food, performing odd jobs, driving for Uber, etc.
Side hustles are great because you can choose exactly what you’d like to do and when you’d like to do it. They could also be very lucrative earning you more per hour than you might make at your normal job. For some great ideas of what you could do as a side hustle, try this list here.
7. Budgeting Will Help Get You Through This
When COVID started becoming financially straining for millions of families across the country, they had no choice but to tighten their belts. But for those people who have never dealt with a budget before, it was particularly hard because they didn’t have any systems in place to make sure they’d have enough to go around.
That’s why one of the best things you can do to prepare for the next pandemic or Recession is to start getting in the habit of budgeting now. By making a budget a part of your regular financial practice, you’ll develop the right habits and skills needed to make good money management choices later on.
If you’d like to get your money back on track, let Buxfer help. Buxfer lets you determine what your spending categories should be and then automatically connects to your accounts to help you keep track. Learn more about Buxfer Budgets here.
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