We can all agree that the last year has been crazy.
The pandemic has affected every area of our lives, including our finances. I have learned so much about myself and my money habits and decided to reflect on this. Here are three money lessons that COVID-19 has taught me!
1. The importance of cash
COVID-19 taught me that cash is king.
I’ve always been someone who is very pro-investing and only having your emergency fund in cash. However, I have very quickly realised that a small emergency fund simply isn’t enough for crazy, unpredictable situations such as a global pandemic. These situations require liquidity and to urgently use your savings. As many of you know, I was made redundant at the height of the virus – this wasn’t financially stressful at all thanks to having over 12 months expenses in cash.
After this experience, I will always value having a liquid cash flow and be sure not to tie up all my money in investments.
2. Living with less
I have learned that I don’t need to spend so much.
While I have always had a strict budget, I made allowances for activities such as going out to eat with friends, going to the cinema, events and festivals. I never cut this down as I always felt that I would be miserable and not enjoy my time off.
COVID-19 has proven me wrong.
I have been perfectly happy spending a fraction of my previous “fun” budget . Instead of attending an event in the city, I’ll go for a hike with my friends or maybe bake a cake together at home. I don’t feel like I have been lacking in anyway as I am still having fun and spending time with the people that are important to me. Moving forward, I will definitely work with a smaller discretionary budget and focus more on inexpensive activities.
3. Attitude towards debt
Debt is scary but I figured with a stable income and low interest rates, you’ll be fine. Until a pandemic hits.
I got so close to buying my first property in Melbourne last year. I was really disappointed that my offer was rejected at the time, but I am really grateful now! After being made redundant, I would have had much trouble trying to service the mortgage without an income. It was a property that I was going to purchase on my own, so I would not have had the stability of a partner’s income to make up for my job loss.
I was already working with a very, very tight budget, therefore would be in a very stressful and financially difficult situation had I bought the property. COVID-19 has taught me that debt should only be taken when you are ready. I won’t take debt so easy in the future, even with low interest rates. I will allow a more “loose” and flexible budget that can withstand crazy events that can completely cripple your budget.