2020 is far behind us and while it was an incredibly challenging year for everyone, it surely taught us some memorable financial lessons that will certainly guide us this year.
Here are the biggest lessons it taught us:
Always Plan for The Unexpected
One notable lesson 2020 taught us is that life is full of unexpected events and we should always stay strapped, financially. At the start of the year, no one knew we’d spend a significant part of the year locked in our houses away from social gatherings and physical communication with the outside world as a result of a pandemic.
Also, no one anticipated job losses, pay cuts and other earning disruptions which were some of the effects of the pandemic on different individuals and organisations across the globe.
An important takeaway from this is that an emergency fund is an essential financial tool. Allocate a specific amount of your income to a designated emergency fund that could bail you out if unforeseen circumstances take place.
The rule of thumb is to have three to six months worth of your expenses stashed away, but it surely doesn’t hurt to allocate more, if you are financially capable.
Your Health is An Asset
In a time when sudden health challenges could cripple one’s finances and take one by surprise, it is very important to invest in your health by taking up a health insurance plan. While many individuals are averse to the concept of health insurance— due to certain sentiments— its importance cannot be overvalued.
If you want to ensure that you do not bear the brunt of certain health-related financial burdens, it’s advisable to consider and implement a health insurance policy into your plans for this year.
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Build Your Saving Culture
There’s nothing like having a safety net made from your dedication to saving. If 2020 has taught us anything, it’s that having money at your disposal is very essential for survival in uncertain periods. You never know when you’ll need to make a major purchase or stock up on essential items. Save, save and save some more in the forthcoming year.
Diversify Your Income & Investments
Hey, no pressure. You might be working really hard at your current job and the thought of struggling with another one might seem stressful. However, if you can take the risk and you’re really interested, you should diversify your income and look for alternative sources. Look for side gigs or start that business you’ve been thinking about for a while.
Diversification is also important when making investments. It’s best to consider different investment opportunities in various sectors, rather than one. This year, spread your investments and do more research into various opportunities.
Stick to The Necessities
2020 certainly forced us to do some more introspection and stock-taking. Some of us were able to assess our financial standings, weeding out the excesses that were weighing us down and paying attention to the actual necessities. We were able to see the importance of having a budget and prioritizing our needs over our wants. Let’s keep this same energy this year, shall we?
What was the biggest financial lesson you learnt last year? Let us know!
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