The COVID-19 Pandemic Might Make Us Better at Personal Finance. Here’s Why.
Let’s be honest: 2020 hasn’t been a banner year for most of us. More than 40 million Americans have filed jobless claims. The nation is officially in a recession. And even as the country has slowly started the process of reopening, we’re still spending more time indoors (and stressed out) than ever before.
But while there is plenty of bad news to go around, the COVID-19 pandemic has also provided some real moments of clarity. As we’ve sheltered-in-place at a slower pace over the last few months, we’ve seen how our always-on-the-go lives often weren’t benefiting us emotionally or financially.
It has been a tough year so far, but it has been one of personal growth, too. Here are the lessons we’ve learned through the pandemic that will make us better at managing our money and our lives:
You Really Need an Emergency Fund
One thing COVID-19 showed us was the unexpected really can be unexpected. Whether it is a flat tire or a rapidly expanding global pandemic, we all need to have some money set aside for emergencies.
The good news is, despite the common narrative, millennials are saving. According to Bank of America’s Better Money Habits 2020 study, 73% percent of millennials are saving for future goals—including building an emergency fund.
The pandemic undoubtedly set us back a bit, but we can recommit to those savings goals again and build our emergency funds back slowly. By setting small goals (the goal tracker on your budgeting app is a great tool for that), we can be better prepared for the next unexpected event.
We Don’t Have to Put so Much Pressure on Ourselves
Pre-pandemic, most of us were rushing through hurried lives. We had a mile long to-do list, a million commitments, and a penchant for keeping up with the Joneses on Pinterest.
While this has been chaotic and stressful on the one hand, on the other, being forced to sit still really highlighted how simple life could be. We’ve swapped expensive weekend getaways for affordable at-home gardening—and we’re enjoying it.
While hopefully we’ll all be together again in-person soon, cutting out some of those expenses was easier than you might have thought.
We Really Can Stop Buying Stuff
Experts have long said that the Instagram generations overspend on Starbucks lattes, avocado toast, and Kylie Jenner lip kits. It was a broad, largely untested generalization. And then millions of people were laid off, forced to work reduced hours, or lost their jobs entirely.
What we’ve learned through all of this is that cutting expenses may be tricky when the sun is shining and your day-to-day life is humming along. But when the chips are down, we can change our spending habits. In fact, a study by merchandising platform, FirstInsight, found that 40% of millennials and 42% of Gen Z cut back on expenses in preparation for COVID-19.
And now that we’ve done the work, we likely won’t go back to impulse buying through Instagram ads anytime soon.
Budgeting Should be Simple
With so many struggling to afford the basics right now, the need for budgeting is more obvious than ever. But we’ve learned we have the best chance of success if we keep it simple.
Budgets don’t need to be complicated. A simple budget designed to help us track our spending, keep up with goals, and keep the pantry well-stocked is all we really need.
Personal Financial Wellness Is All About Habits
Managing an emergency is infinitely harder if you aren’t prepared for it. Before COVID-19, maybe you didn’t have a budget, or an emergency fund, or maybe you weren’t tracking your expenses. And if that was the case, the first few weeks were especially rough.
But as the weeks wore on and you found your groove (or at least managed to get by), it was easier to spot ways to make the next emergency more manageable. And it all comes down to habit.
Habits make up 45% of our days and we can make anything—like saving a small amount each week—part of our routine. Going forward, we can make small steps to build up good financial habits so we’re better prepared for whatever life throws at us next.