The COVID-19 pandemic had a significant social and economic impact on people’s lives since many individuals were thrown into a financial crisis as a result of the suspension of most enterprises and commercial activity, resulting in job losses and wage reduction.
Who’d have guessed a lethal illness could teach us a thing or two about money? In reality, this pandemic has taught everyone throughout the world some extremely valuable lessons. We will share 5 important financial lessons for young adults with you, dear reader, in this article:
5 financial lessons you should learn from the COVID-19 pandemic
1- It’s crucial to have an emergency fund.
Some folks don’t grasp the value of rainy-day savings until it’s too late. Everyone realized that setting aside money for emergencies could mean the difference between life and death for many people in terrible situations.
Regrettably, some people ignored this counsel until the catastrophe caught them off guard. There are people who have had their income cut off and are now unable to satisfy their basic necessities, as well as those who have been forced into bankruptcy by small business owners.
Without reserves, you are vulnerable to a financial crisis that could last for years. So one of the financial lessons you can learn from this pandemic is to save three to twelve months’ worth of living expenses. Now start creating your own emergency fund so that you are not vulnerable or among those who believe that when the tide goes out, the naked swimmer appears.
2- The second source of income is a necessity, not a choice
It should show you billions of workers being laid off and others being paid lower as a result of the pandemic and poor job security that some expected. After these recent events, many people have realized that in order to keep the money flowing, they need a second source of income that will protect them during any future financial crisis.
Putting all your eggs in one basket when it comes to investing is never a good idea, and the same is true when it comes to income.
From now on, you should know that you should not rely on one income because increasing the sources of income is one of the most important financial lessons that you benefit from, and if you have not planned in advance to diversify the sources of income, then you should put it at the top of your priority list now. The financial meal here is to rethink your personal life goals and include creating a second source of income in your plans.
3- Borrowing has two sides.
In difficult circumstances, such as the current one, a decline or loss of income might be the cause of an inability to continue making loan payments, notwithstanding some government assistance or short-term facilities.
The COVID-19 problem has shown us that there is no use in living beyond our means because becoming entangled in needless monthly payments is one of the greatest financial mistakes a person can make.
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When used correctly and strategically, loans can relieve financial stress and save us from financial disaster, but the demand for loans only in order to benefit from them can be a huge hindrance to you. Another financial lesson we can learn from this pandemic is to borrow wisely and create a contingency plan to ensure we can repay in tough times like ours.
4- A budget is a tool for saving money, and it should be made a habit.
Due to the loss of income, many families have had to think carefully about how to spend every available dollar. Furthermore, many people who have lost their jobs or whose salaries have been slashed are forced to stick to a strict budget to cover their basic requirements during the crisis.
Most people despise the idea of budgeting to keep their spending in check when things are going well. why? Because they think the budget limits them from freely disposing of the money they have worked so hard to get.
Budgeting is not meant to limit your life, nor should it limit you from purchasing some of the requirements that you really want; It simply directs you to your highest priorities.
Our priorities have changed since the pandemic because the majority of people are now cutting back on discretionary and luxury spending, which negatively impacts their budget and can cause them to run out of income before the month is over.
One of the financial lessons to bear in mind is that impulsive spending almost always leads to spending a lot of money on a luxury.
At the very least, sticking to a budget that prioritizes spending and encourages saving should be a habit, not something you do only when conditions get tough.
5- Change can happen quickly and unexpectedly.
You may have heard of the economic cycle, often known as the boom-bust cycle. That is, economic activity is constantly changing as it moves from a state of recovery and expansion to a state of contraction and stagnation, then rises to enter the stage of growth again, and so on. On the other hand, Covid-19 has caused a complete economic shutdown that no one could have foreseen.
It serves as a nice reminder that anything can happen! Having emergency funds and getting out of debt is an excellent way to prepare for any unexpected negative economic events, and having many sources of income will fortify you and your family.
In the hopes that the virus will be extinguished soon, we hope that our loyal viewers will be able to go through this period unscathed. We’d appreciate it if you could tell us what you’ve learned from this pandemic and what changes you’ll make in your life to make the world a safer place.