Last year was a tiring year for most people. The loss of job/ source of income, the lockdown and the virus itself has made the year a year to remember. The lockdown was the highlight of last year, and most lessons tend to look at the lessons the virus taught us.
I read somewhere that tests keep repeating themselves until the lessons they meant to teach are learnt.
We learned from the many lessons 2020 taught us. Here are my top personal finance lessons.
Of all these lessons, there is one that stands out for me; I learned it the hard way. Read to find out which.
Health is wealth: From the deaths of loved ones to celebrities, the loneliness due to lockdown has tested our mental and physical health. Health is one of the underrated assets.
A wise man once said, "A healthy man wants plenty of things; a sick man wants only one".
COVID tested the capacities of our health facilities and highlighted how unhealthy our lifestyles are too. People with pre-existing medical conditions (such as asthma, diabetes, heart disease) appear to be more vulnerable to becoming severely ill with the virus.
Both mental and physical health is a priority. Leaving one for one is as dangerous as it can get.
Taking our health serious has to be top of the lessons last year taught us all.
Emergency funds are not wasted funds: We always hear "save for the raining day" what we don't hear is prepare for the storm. Once again, emergency funds saved the day for many people who were let go of their jobs due to the virus. It served as a safety net for many individuals and families, the barrier between going to zero, starving, and having something to eat and keeping the lights on.
Having multiple income sources: The shock and terrible feeling of people's thoughts and realisations let go of their only job or loss of their sole income source. The idea of one source of income hasn't been challenged with this impact since the financial meltdown of 2008.
Today many people have learnt the hard way that having multiple sources of income isn't any longer a luxury but a necessity.
The future is unknown: The truth is no one knows what would happen tomorrow, Next month, or next year. We can only predict, follow trends and plan accordingly. The previous year was no short of surprises.
In essence, have a plan and a plan when things don't go according to plan.
More cash at hand and bank: This point is particularly personal, early 2019, I bought stocks with almost all the money I had during a small deep on my favourite stock and some bonds, quite happy with the returns. Then came early 2020, and that was really when I wished I had not used the money at that moment.
Not that I haven’t been told not to overtrade, I knew it, but I had not taken it to practice, and it stung me really bad.
Being tied up in investment and not having some money for other daily needs or opportunities that come once in a while is not advisable. A typical example was the market tanking in March; there was a massive gap for those who had access to cash(liquidity) to swoop in and buy assets at an enormous discount.
To put these lessons to practice, here are some actionable advice.
- Take your health seriously. Exercise, eating healthy, avoid junk content, toxic environment and people.
- Earn more. Learn more skills, add another stream of income- passive or active.
- Have your finances in order. Create a budget and stick to it and save a portion of your income