When the coronavirus pandemic first hit, I, like many working parents, was a little lost. My first priority was to keep my family safe and to shield my children from the fears a lot of us were experiencing. But I also took steps to help ensure that the pandemic didn’t ruin my personal finances. Those included working until all hours of the night to avoid a disruption in income when my daytime hours were occupied with remote school and strategically cutting back on purchases until things settled down.
In the end, the pandemic taught me some very important lessons. Here are three that stick out in my mind.
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1. It’s okay to have a robust emergency fund
I’ve always been financially paranoid. I frequently worry about unplanned bills like home repairs, and I’ve been known to go overboard on the emergency fund front by socking away extra money in my savings account rather than the three to six months’ worth people generally need.
But the pandemic actually affirmed that my paranoia wasn’t totally misplaced. While I, thankfully, did not see my income take a hit last year, many people had a very different experience and dealt with significant income loss. As such, I made the decision to boost my emergency fund to a little over a year’s worth of bills last year. I was able to do so when our vacation plans got cancelled, summer camp was called off, and I had more time to work (and boost my earnings) by virtue of having nowhere to go.
I used to think that saving more than six months’ worth of bills was actually excessive. But the pandemic has helped me realize that a year’s worth of expenses in savings isn’t going overboard, at least not for me. Because I’m self-employed, my income is unpredictable to begin with, and so having that extra cushion is a smart move.
I do recognize that by tying that money up in savings, I’m losing out on the higher returns an investment account could give me. But the peace of mind is well worth it.
2. It’s smart to have a backup income source
I’m very grateful that there was plenty of demand for the work I do during the pandemic. But I also realized that I was very much putting all of my eggs in one basket.
As such, I started exploring other business ideas (like a dog-walking service) during the pandemic that I could revert to if the need happened to arise. Thankfully, it didn’t come to that, but now that I have those plans mapped out, they’re a good thing to have in my pocket.
3. It pays to stock on staple items strategically
Remember the great toilet paper crunch of 2020? How could anyone forget? Had it not been for the fact that I just happened to buy a 36-pack at my local warehouse club the week before things got bad, we would’ve been sorely out of luck.
While I’m certainly not a fan of hoarding items, and I do think we all need to be careful about overstocking perishable items, the pandemic made me realize that it makes sense to maintain a healthy supply of household staples like paper towels and soap. Thankfully, between my basement closets and garage, I have the space to store these items, and my warehouse club membership helps me pay less for them. As such, there’s no reason to not keep a little extra on hand — to a reasonable extent, of course.
Even once the pandemic is long behind us, I have a feeling a lot of people will be permanently changed by it. So far, my financial outlook has definitely been impacted by the events of the past year, and while I hope we never have another one like it, the one positive thing is that it did teach me to be a bit more fiscally responsible.
View more information: https://www.fool.com/the-ascent/personal-finance/articles/3-financial-lessons-i-learned-from-the-pandemic/