We all had to make some changes to how we run our financial lives in 2020. Whether it’s cutting out unnecessary spending, creating new side hustles for alternative streams of revenue, or changing our living situations entirely, we’ve made adjustments – just so we can survive.
Learning big lessons has been a theme this year, and we imagine this will extend to our finances next year, too. Here are some financial lessons we’ll carry into 2021, knowing what we know now:
1. The importance of savings
Many people lost their jobs this year, and we bet only a few of those had emergency funds to help them get by. We’re not talking pensions or long-term investments here, but rather accessible cash that’s saved in an interest earning account. Before Covid, experts generally recommended saving 3 months’ worth of your salary, but we reckon 6 months is more like it. This may sound difficult but the sooner you start, the better. Even if you didn’t lose your job, the knock-on effect of this virus is going to be felt on our economy for years, so it’s best to get prepared.
2. Don’t put all those eggs into one basket
It’s all about diversifying. Covid-19 restrictions hit some industries much harder than others and if you invested all your time and money into anything travel or entertainment related for example, you would have been heavily affected this year. We feel for the hotels, and those people who relied entirely on AirBNB income to get by since they experienced drastically reduced opportunities to make an income. On the other side of the coin, online retail and tech-specific companies have been given the chance to shine in 2020, showing us that the trick to being financially secure is to spread the risk across industries and asset types.
3. Got a will?
We don’t like thinking about falling ill but this virus has shown us how easily it can happen. Many have tragically lost loved ones this year and if they didn’t happen to have a will, this likely had disastrous consequences, causing much emotional stress and financial strain on those they left behind. If you don’t have one, get a will written up, and also consider taking out life- or funeral insurance so you can leave a positive legacy if you pass away.
4. Re-assess those expenses
If your life has changed this year, so should your expenses. Maybe you only need one car now, seeing as you’re not going into the office as much? Perhaps you’re eating out less, or can spend less on clothing, as you’re doing less socialising? Look at any ways you can reduce expenses and take control of your budget. This will make 2021 more manageable, as well as giving you increased opportunities to save and build a stronger financial future.
5.Streamline your “stuff”
This may not seem like an obvious one, but this year has caused many of us to reassess our homes and what’s in them and consider a simpler, less cluttered existence. Many of us have been cleaning out the garage, donating items to charity and even making a bit of much-needed cash from things that were simply gathering dust. It’s all about adjusting our priorities, and this can only be a good thing – as we head into 2021 wiser, stronger and better prepared for whatever comes our way.