There are 7 important financial lessons from Covid-19.
In just a matter of weeks/months the economies of virtually all the nations of the world began to crumble like a pack of cards.
- Governments and companies had to revisit their financial projections and budgets.
- Covid-19 brought a lot of problems for many people the world over.
- Many people found themselves staying at home against their will
- Some lost their jobs
- Yet others lost their lives and loved ones
- Everybody wondered what went wrong
- Making financial decisions became very challenging.
There are many financial lessons for governments, companies and individuals to learn from the covid-19 pandemic.
However, this article is focusing on financial lessons as they affect individuals.
How it affects governments and companies is a matter for another post.
Therefore, this is not the time to continue to lament on our experiences.
It is said that in every challenge, there is a lessons to learn just as there could be some opportunities to tap into.
Fortunately, the following are some of the financial lessons to learn from the pandemic:
Financial lessons: Avoid Overconfidence
Before the covid-19 pandemic, some people became overconfident.
Consequently, many people did whatever pleased them, thinking that nothing unexpected could ever happen.
For example, some people:
- Bought extra special cars for special occasions
- Sacked their aged wives who they consider no longer serviceable
- Some methods are the married additional wives as backups, in case somebody kicks
Therefore, many people made poor financial decisions which they are now regretting today.
Create Emergency Fund
Another financial lesson to learn is that we must learn to create emergency fund.
It is true that it is not easy to save money especially when your pay is small.
This is because savings are possible only when your income is more than your expenses.
In other words, symbolically, Income – Expenses = savings or investment.
Moreover, savings make sense. We do not need to live from hand to mouth without putting something aside for a rainy day.
More importantly, experience has shown that only those who saved money before the covid-19 were able to sustain themselves.
Most importantly, emergencies could occur any time without notice. Emergency fund can have you covered.
Therefore, we should endeavor putting aside, at least 5% of our monthly income.
Have multiple streams of income
Yet another lesson to be learned from covid-19 is that we should try to have multiple streams of incomes.
Developing multiple streams of income is now more important than we realized.
A very important lesson from covid-19 pandemic is that multiple streams of incomes can:
- help us reach our financial goals when times are good, as well as when things get really rough.
- sustain us when things like lay offs or similar events occur.
Therefore, developing multiple streams of income is worth considering.
Financial lessons: Avoid accumulating debts
Avoiding debts accumulation is another important financial lesson covid-19 pandemic has taught us.
In other words, we should live lifestyles that are sustainable.
For example, some people are known to have bought expensive cars just to show off that they have arrived.
Some people incurred bills they could not pay as at when due.
During difficult financial periods, debts burdens bite even harder.
We have less money to pay the bills, and the accumulation of late fees and interests make the debts even greater.
Save for retirement
Covid-19 pandemic also taught us to learn to save money for retirement.
You need to save for retirement because:
- when you retire, at least 80-90% of your recurrent expenses remain still remain.
- This is particularly bad if on retirement you have no roof over your head
- it will also be bad news if you cannot feed because the monthly pension did not come when it should.
- your medical bills must still be paid.
Furthermore, there are several ways you can save money against retirement.
For instance you can:
- invest in government bonds
- stocks [shares]
Savings and investments are the surest means to a successful retirement.
However, ability to save and invest requires that you have financial discipline and the right mindset.
Financial lessons: Live on the margin
Emergency funds, debt-free living and retirement savings are all worth pursuing.
However, in order to be able to save or invest demands that we need to live on the margin.
In other words, we should review pre-covid-19 standard of living.
In addition, we should not do things because we see people doing them.
Furthermore, we should never allow the size of our salaries to determine how we spend our money.
Be generous to the needy
Another financial lesson we should learn is to be, able reach out to the needy and the vulnerable people.
For example, we can help the poorest of the poor in our mist.
Furthermore, the little kindness we do to the to the really needy among us matters matters a lot to them.
Covid-19 has knocked us down and we all are hurting.
But we should not be content with lying on the ground.
Financial lessons from covid-19 should equip us to make better financial decisions for the future.
Finally, it is said that you can blame a man for falling you, but you cannot blame anybody for failing to stand up.
By Samuel Ijenhi
B. Sc. Accounting [University of Benin]
Benin City, Nigeria.