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.
These are the three money lessons that this crazy time has taught me! What have you learned during this time?