Whether you have been impacted or not by the economic challenges presented the pandemic, there are money lessons that we all should learn from this situation. These lessons can help you be better prepared to weather financial storms in the future.
What are the most important lessons that people need to have learned during the last 6 months?
Having a budget is critical for making decisions
Using good money habits makes a difference
Building an emergency fund is not optional
Building debt based off our full income isn’t wise
Let’s talk about each one of these, how does having a budget help in times of economic uncertainty?
A budget helps you make decisions on how to trim expenses and also build scenarios if income is reduced or eliminated. Without a budget, people often make decisions that have unintended negative consequences from running up credit card debt to adding too many non-essential recurring expenses that might be difficult to end quickly.
What are some of the most important money habits to use?
Comparison shopping, using discounts/coupons and avoiding impulse buying are the top three money habits that we need to all use every day but especially in tough economic times. These are three big tools to help us avoid spending more than we earn and might also help to find the money that we should all be saving for a rainy day.
Why does having an emergency fund matter so much?
Building an emergency fund is really the only way in keeping a loss of income from wrecking havoc with your financial situation. Without one, you will be forced to use debt, your retirement funds and any other money you can find to pay for essential needs like food and shelter. This strategy almost always results in a situation that you can’t manage forever and can spiral out of control quickly.
What should people have learned about managing debt?
The biggest lesson is that we shouldn’t increase our debt to the maximum we can afford in good times because when the bad times arrive, we won’t be able to make the payments. This means buying a little less house or car, saving instead of borrowing for bigger purchases and most importantly accelerating debt payments in the good times. Debt averse isn’t likely a reality for most but being debt aware is extremely important.