As we bid farewell to 2020 (not a moment too soon), one thing is sure: it was a year filled with learning experiences. And many of those lessons were financial in nature. Let’s take a look at the biggest financial lessons of 2020, and how we can use what we’ve learned in 2021 and beyond.
An Emergency Fund is a Must
We’ve been preaching it for years and this year reinforced the point like never before. Everyone, regardless of age or financial situation, should maintain a cash emergency fund that can cover 3-6 months of living expenses. This year, so many Americans lost their main source of income virtually overnight. Those without emergency savings to fall back on found themselves scrambling to pay bills and pay for basic necessities. If you’re not sure where to start, or if saving enough to cover 3-6 months of expenses feels like an impossible goal, shoot for an initial savings goal of $500 and continue to build on it from there.
A Full Wallet Beats a Full Calendar
With more time spent at home and less opportunities to attend activities such as sporting events, concerts, and plays, many people found they were actually able to save more money than usual. For some, it was a realization that they often spend money on these things just because it’s an expected way to socialize, without asking themselves if they really enjoyed it. When things eventually get back to normal, you’ll want to remember how you spent your time this year and think twice before filling up your calendar just because there are things to do.
Everyone Needs a Budget
Like an emergency fund, budgets are for everyone, regardless of their current financial situation. Without a budget, you have money coming in and going out with only a vague idea of where it’s really going. You may think it’s all going toward bills and essentials, but without tracking your spending, there’s no way to really know. If you’re worried that following a budget is boring or restrictive, imagine the peace of mind you’ll have when you always know where you stand financially. After the stress of this year, that alone is a priceless commodity.
Maybe it’s Time for a Side Hustle
If you suddenly find yourself unemployed, would you have to access your emergency fund right away? Maybe not, if you have a side hustle. Adding an additional stream of income can help you build up your emergency savings and might even keep you going if you lose your main source of income. Consider doing gig work or freelancing in your chosen field to make some extra cash.