Like most people out there, many of us entered the global COVID-19 pandemic believing we were in good shape financially. As time goes on, however, the pandemic is revealing that some of us – especially millennials – have to do a lot more in order to deal with financial uncertainties. This is especially true now, when jobs are becoming harder to come by and businesses are continuing to shut down.
Spending more time at home due to stay-at-home orders, lockdowns, and quarantines has meant spending more money to sustain our daily lives during the pandemic. This has taught many millennials some hard personal finance lessons as they face the reality that they need better planning for unexpected situations that arise.
Here are five personal finance lessons millennials can learn from the pandemic:
1. An Emergency Fund Is a Must-Have
You’ve most likely come across numerous articles about the need to have an emergency fund, even before the pandemic hit. Well, the unprecedented outcomes of the COVID-19 pandemic have proven just how important it is to set aside some cash for unexpected situations. With job cuts, reduced incomes and increasing expenses, no one expected the situation to get this bad.
After School Finance notes that you should have at least three months, or more, of your monthly expenses saved in cash to protect yourself from financial troubles during emergency situations. The aim is to build up an emergency fund that can help you pay your bills, mortgage, buy essentials, and cover unexpected costs in case you lose your primary source of income.
2. Have a Plan B for Your Source of Income
Your source of income matters. And for millennials who tend to spend more, it’s more important than ever to have a Plan B or even a Plan C when it comes to income sources. The pandemic has significantly impacted the job market and businesses, resulting in high unemployment and even bankruptcy for some individuals. The pandemic has reinforced the need to have a side gig and to be flexible in job sourcing and working.
It’s not surprising that many people are changing their career choices to readjust to this new norm. We don’t know what the future holds, but we do know that those who had a plan B or a side source of income have fared better. Go ahead and learn that new skill you’ve always wanted, or look for ways to improve your employability. Even better, think about how you can actualize that business idea you’ve always had.
3. Health and Life Insurance Are Vital
The pandemic has also highlighted the importance of having adequate health and life insurance. Unfortunately, those who had health insurance coverage with their employers found themselves paying for their medical expenses out-of-pocket after losing their jobs. With the unpredictability of such situations, it may be wise to get personal health insurance.
Life insurance is also another consideration, especially if you have a family that you wish to provide financial support for in the event of your death. Having a will is also another sensitive issue that millennials don’t often want to talk about. Yet, given how the pandemic has affected both young and old, having a will ready isn’t something you want to dismiss.
4. Invest During Uncertainty
The best time for investing is when other people are scared. When the pandemic started, the world faced unexpected and unimaginable risks. Many businesses have closed down, companies resorted to downsizing, and the economy’s growth suffered.
However, history has shown that a great entry point for stocks is when the market is down by at least thirty percent. Thus, for those who bought stocks last year, the uncertainty and decreasing market confidence are worth risking, since returns would be higher once the economy recovers. So, if you start investing during this uncertain time, you increase your chances of earning above-average returns.
5. High-Interest Debt Is a No-Go Zone
Avoid high-interest loans such as payday loans and credit cards whenever you can, as they end up straining you more financially in the long run. While they seem like a lifesaver, it’s always better to ask for help from friends or family first – where interest rates will likely be 0%. With interest rates trending lower amid the pandemic, there’s no better time to put more cash toward refinancing your loans.
Consider paying down your high-interest credit cards, mortgages and other loans. Keep up with all the regular payments, even when you get temporary deferrals. It will save you a lot of financial stress in the future.
6. Practice Good Financial Habits
Finally, the pandemic has taught us about the importance of spending more wisely and saving more. Many working millennials realized that financial discipline can be practiced. The restrictions that were placed on non-essential things such as traveling and eating out helped many realize that they can live without such things. People began to reflect and realize the value of spending moderately and saving money. Indeed, the COVID-19 pandemic has served as a way for many people to change their mindsets and financial habits.
If you have never had a budget, now is the time to develop one and find an accountability partner to keep you in check. Implementing and maintaining good personal financial habits will put you in a better position the next time life throws you a major financial curveball, like a global health pandemic.
With the coronavirus pandemic hopefully nearing its end, there’s plenty of financial damage to be checked. However, there are also several lessons that millennials have learned. These lessons are worth remembering and should hopefully keep people financially sound regardless of what the future holds.