There is always a bright side after any crisis. These are the lessons we learn helping us to become stronger and smarter from our experiences, ready to face the future.
There is always a bright side after any crisis. These are the lessons we learn helping us to become stronger and smarter from our experiences, ready to face the future. Lives have been lost, markets tanked and jobs vanished. Unemployment reached new lows. People, business men and entrepreneurs wonder how and what they could do to minimize the impact of the crisis. People wonder what has to be done to minimize the financial risks on a possible future crisis. The point is not to dwell on our mistakes and regret for being un-prepared but to move forward and be ready to face similar challenges in the future.
What are the most important financial lessons we have learned from the pandemic crisis?
Financial confidence can bring troubles.
Few months ago, the markets were up, unemployment was low and everything was blooming. These kinds of situations put people, businesses, entrepreneurs and investors in a relaxed and obviously “spending” mode. Spending more, accumulating debt, choosing riskier investments and saving less. Generally being aggressive in our financial decisions is normal when the market is up, but this overconfidence can put as in trouble. We must be wiser and know when to be aggressive.
Emergency Fund is a must.
Financial emergency is not a matter of “if” but “when”. Financial experts keep stressing the importance of keeping an emergency fund. The ones that have money aside for an emergency are obviously more prepared when the time comes. The question is, how much to save? Financial experts recommend three to six months’ worth of living expenses. Remember. The emergency will happen sooner or later. We must be prepared.
Consider multiple streams of income.
Having an extra source of income is always a good practice. If you don’t have any passive income, then you might need to start a side gig in order to generate some more money. These money can pay debts or only be used for savings. It doesn’t need to start with big amounts of income. It just needs to start. What the crisis has taught us is that multiple streams of income can not only help us reach our financial goals when times are good, but they can also help us make it through times when the economy tanks and layoffs are common. Finally, the additional income streams provide a chance to generate some income even if a job is lost. Consider building or having a side job, even if this will mean less free time and remember to be patient.
Debts, debts and more debts.
Most of us can’t actually afford credit card balances, car loans and mortgages. We usually try to keep up with our social circle but statistics show that they probably can’t afford their lifestyle eighter. The bills run and we are trapped in a circle that never ends. Even if we hate this non-stop rat race, we still have to pay the bills. During tight financial times (like the 2013 crisis) this financial obligations feel much heavier. We have less money to pay the bills, and the accumulation of late fees and interest make the debt even greater. Having fewer financial obligations make our lives easier and stress free.
Stick to your retirement or investment plan.
During tough time is possible that fear will affect our emotions and make us consider abandoning our retirement or investment strategy. This is a huge mistake though. Successful retirement investing, or generally investing is about long-term discipline. Don’t let your emotions override your long-term mindset. Stick to your plan, keep the insurance or your investment and you will never regret it.
The article is based on the article of Art Rainer for Entrepreneur.com