Last year was a tiring year for most people. The loss of job/ source of income, the lockdown, and the virus made the year a year to remember. The lockdown is 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, one stands out for me; I learned it the hard way. Read to find out which.
Health is wealth: The deaths of loved ones to celebrities, and the loneliness due to lockdown, have 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, and heart disease) appear more vulnerable to 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 must be top of last year’s lessons.
Emergency funds are not wasted funds: We always hear “save for the raining day”, but what we don’t hear is prepare for the storm. Once again, emergency funds saved the day for many people who lost their jobs due to the virus. It served as a safety net for many individuals and families. The barrier between starving, having something to eat and keeping the lights on.
Having multiple income sources: The jarring shock people experienced when they learnt that they were let go of their only job or lost their sole income source can’t be rivalled—one of the worst experiences anyone can ever have.
The idea of one source of income hasn’t been this challenged 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 will happen tomorrow, Next month, or next year. We can only predict, follow trends and plan accordingly. The previous year was nothing short of a surprise.
In essence, have a plan when things don’t go according to plan.
More cash at hand and bank: This point is particularly personal. Early last year, I bought stocks with almost all the money I had during a small deep on my favourite stocks and some bonds, and I was pretty happy with the returns. Then came early 2020, and I wished I had not used that money.
Not that I haven’t been told not to over-trade, I knew it, but I had not taken it to practise, and it stung me awfully.
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 with access to cash (liquidity) to swoop in and buy assets at an enormous discount.
To put these lessons into practice, here are some actionable things to do:
- Take your health seriously. Exercise, eat healthy, avoid junk content, toxic environment and people.
- Earn more. Learn more skills, and add another income stream - passive or active.
- Have your finances in order. Create a budget and stick to it, and save a portion of your income.