According to Einstein, insanity is defined as making the same mistakes and expecting different results. In other words, we need to learn from the errors of our past. In some cases, like a global pandemic, for instance, those lessons are more painful. All the good financial advice that we’ve ignored throughout the years suddenly makes sense when we are faced with extreme adversity.
It doesn’t need to happen this way again. Consider reading and re-reading the debt guide from Credello. A cursory glance at valuable personal finance tools such as this is no longer acceptable, and this is true for all of us. It’s time to re-examine the money lessons we learned during Covid-19.
Lesson #1: Eating at Home is a Lot Cheaper
Every budget article you’ll ever read tells us that take-out food is a non-essential expense. During the height of the Covid-19 pandemic, we were forced to eat at home. Much to our surprise (or not), those home-cooked meals turned out to be a lot cheaper than what we spend on fast food and pizza, not to mention our morning coffee.
Lesson #2: The Stock Market Always Rebounds
In March of 2020, there was a massive sell-off when the bottom dropped out of the stock market. Savvy investors seized that opportunity to buy because they know that the stock market always rebounds. In their case, that rebound happened quickly and many new millionaires were made. That could be you next time.
Lesson #3: Don’t Rely on Quick-Fix Solutions
Government stimulus checks did not turn the economy around, PPP loans didn’t save American businesses, and the Covid-19 vaccine didn’t make coronavirus go away. These were all measures that helped relieve the pain or slow the downward progression. There are no quick fixes. All good things in life need to be earned, and that takes time.
Lesson #4: Don’t Borrow What You Can’t Pay Back
Speaking of PPP loans, many borrowers took them with no intent or means to pay them back. They were classified as “forgivable,” but there was some fine print on that stipulation. Failing to read those disclaimers has resulted in several loan defaults. Though it will take some time to get the actual numbers, the lesson is clear. Don’t borrow what you can’t pay back.
Lesson #5: No Job is Guaranteed
What the world experienced last year may seem unprecedented, but it’s happened before. The Spanish flu of 1918 killed 50 million people. We like to think that the worst-case scenario will never happen, but sometimes it does. Tragedy is always a possibility, taxes are inevitable, and no job is guaranteed. Starting a side hustle now to buffer a potential job loss is not a bad idea.
Lesson #6: Emergency Funds are Necessary
To conclude this somewhat morbid dose of reality, we’d like to point out that the term “emergency fund” took on a new meaning last year. Covid-19 was a real emergency, one where many hard-working Americans had to dip into their savings to survive. If that’s your story, please rebuild those accounts as soon as possible. Emergency funds are necessary.