There's no denying the fact that the COVID-19 pandemic changed the way we live our lives. From making the shift from working in an office to working from home, to catching up with friends via Zoom instead of at happy hour or on the golf course, and even wearing the teacher hat to assist with virtual learning for our children, we adapted to our new circumstances and made major changes to our routines. While the majority of the changes we made were largely unpleasant and made out of necessity rather than desire, there were a few positives that we can take away from the months of isolation. Namely, we took a step back and looked at money differently.
With so many unknowns, especially at the very start of the pandemic, many of us were forced to face our financial situations head on. Will I still have a job next week? Will my unemployment check be enough to cover my expenses? What will the market look like by the end of the pandemic? Should we be preparing for another recession?
We had so many questions and no certain answers. But, together, we made it through. Now, as the world begins to open up again amidst the rollout of vaccines, there is no better time to reevaluate your personal finance and spending habits. Here are some key takeaways to keep in mind.
Always have an emergency fund
The year 2020 showed us that not only can emergencies happen, but they do happen. There were huge job losses during the pandemic, and even for those who kept their jobs, pay cuts weren't uncommon. For people with substantial loans or other financial commitments, this posed an especially large problem. The takeaway is that it's always better to be overprepared than underprepared, and an emergency fund can drastically help to reduce the impact of shorter-term economic disruptions on your income and spending habits.
Budget wisely and eliminate frivolous spending habits
Base your spending on needs, rather than wants. With many of us experiencing limited funds during the pandemic, we were forced to take budgeting more seriously and prioritize the necessities like food and bills over frivolous items. We had to seriously think about what is actually essential and what is not. As we come back from the pandemic, it's a perfect opportunity to re-budget based on necessities, rather than frivolities.
It is possible to be financially disciplined
On a similar note, while we may have missed traveling, shopping in retail stores, eating out, and other nonessential fun activities during the pandemic, we were able to get by without them. Many of us were forced to face how much money we typically spend on these indulgences. While it's very exciting to be able to go to the movies, attend baseball games, and dine at our favorite restaurants, try to keep your spending in check.
Revisit your estate plan
Unfortunately, during 2020 we were also confronted with our own mortality. With the virus killing more than 500 thousand Americans, we've had to think about death and all that comes with it, including the financial burdens. Having an estate plan is paramount to preparing for the inevitable. If you need to revise your estate plan, or if you need to put an estate plan together, don't put off scheduling a meeting with an estate planning attorney.
Reassess your finances annually
Our finances are ever-evolving, making it imperative to continually assess our financial situation. Call it a financial "spring cleaning," if you will. Consider using our Annual Financial Health Checklist, a month-by-month checklist of some key financial tasks to consider throughout the year to ensure that you are on the right path.
We've been through a lot together over the years, and I will continue to be by your side through the good times and the bad. Through our unique approach to financial planning, we don't just build a blueprint for your financial future that aligns with your needs, goals, and aspirations, we walk together every step of the way.