How COVID-19 Has Changed Personal Finance

Going into 2020, I was ready for the best year ever.

It started off so well too. I've been watching the Chiefs since the Trent Green & Priest Holmes days and to finally see them win a Super Bowl was a top 5 all-time moment.

Conspiracy theorists have “predicted” the end of the world so many times over the years.

But here we are, September 2020, and the sun is still coming up every morning.

If 2020 isn’t going to be the end of us, there’s a lot more that we need to be prepared for and learn from the wild ride we’ve experienced so far.

Here are 3 ways that COVID-19 has changed personal finance (for the better?).

Exposed the need for an emergency fund

With how quickly everything started to head south early in the year, there wasn’t much time to prepare financially if you weren’t already.

2020 has displayed the exact reason why the best financial planners across the country preach the need for an emergency fund. We truly don’t know what’s going to happen at any given time and an emergency fund can help relieve some of the stresses associated with uncertainty.

ALSO READ: Financial planning in today's world

A general rule of thumb is to have 6 months of your expenses saved in a separate account only to be used for emergencies. If you lost your job in March and had 6 months of expenses saved, your monthly expenses would have been completely covered until September.

An emergency fund acts as a safety net for life’s uncertainties and provides that peace of mind when everything else is the opposite of peaceful.

Normalized volatility

We’ve seen some of the craziest market swings in history within the past several months. The longest bull market ever came to an end and we also escaped the bear market in record time.

Many years ago, people would’ve freaked out and not known what to do with such volatile markets but it seems as if crazy markets are a norm now. I'm not saying that people still don't panic buy and sell, but fluctuations in the market seem far less important maybe due to everything else happening in the world right now.

As the great Tony Robbins highlighted in his book Unshakeable, "The S&P 500 has fallen, on average, 14.2% at least one point each year between 1980 and 2015, but the market still managed to finish the year in positive territory in 27 of those 36 years."

Money can be made in even the worse markets because so far, the market has always rebounded from its previous low.

John Templeton once said, “the best opportunities come in times of maximum pessimism”.

Altered regular spending

There’s already been a large downsize in how much people are spending on travel and eating out, but what about the rest of your spending?

Quarantine and lockdown has given some the opportunity to almost ‘reset’ their personal finances. Excess spending became less popular for some, unless you spent quarantine picking up the latest Amazon Prime delivery off your porch (which is completely understandable).

If you were affected by COVID financially, it may have led you to evaluating your spending and only purchasing true necessities to get by. While living on such a tight budget isn’t the most glamorous or fun thing to do, it can really make you think about where every dollar is going and alter your future perception on money.

Final Thoughts

All in all, COVID has affected millions of people across the world and will probably continue to have a lasting impact into the foreseeable future - but there are always lessons to be learned in every event and situation.