What Have We Learned From COVID-19? - Financial Planning is Essential
On New Year’s Eve last year, I found myself surrounded by new friends in a small gathering in Washington, DC, where some of us celebrated our academic achievements from 2019. Two of us had just graduated with our master’s degree, while one of us was about to start hers and was excited about the new challenge. I was coming back from Christmas family reunions, secret Santa gift exchanges, and lots of food and family traditions. We were looking forward to the closing of 2019 and the ambitious resolutions we set for a prosperous New Year. This time around, the end of the year finds us in a very different position while we reflect on the lessons learned from 2020, pray for those who have lost loved ones this year, and hope 2021 brings us all more stability.
This unimaginable year shocked us all, leaving us with the certainty that we need to be more prepared for the unexpected in the coming years. I saw very close friends lose their jobs, my family reinventing their business to stay afloat, and millions around the world struggling to meet their financial needs by the very first months of the lockdown. I can count myself among those that were lucky and kept their jobs, transitioning to telework mode, and continuing with my regular schedule. Not for one second this year I have stopped being grateful for that. However, just like to anyone else, it was clear to me that job security had become rare and is never granted, and that I needed a plan to have the ability to cover for any emergencies.
Financial planning has always been important to me. Learned by the example of my parents and reinforced by the uncertainty we faced as a family when we moved to the United States; I have always known planning for my future was essential. I also knew that having an emergency fund was important. However, it wasn’t until we saw the effects of the pandemic that it really seemed to be a necessity. I realized this year that having a financial plan in place not only means that you are more prepared to overcome unexpected situations, such as the loss of a job, it also means that you experience less anxiety about the future and can become empowered to reach for higher financial goals with more ease.
The first months of the mandated lockdown allowed me to take a moment to review the way I was spending my income. Because many activities that were part of my weekly or daily routine before COVID were restricted, I was able to save by staying at home and eating all my meals at home. The dramatic change in my routine helped me determine what unnecessary expenses I could cut off from my budget permanently. Although I was able to keep my job I knew I needed to allocate more money towards my savings, and I could see with more clarity which expenses were unnecessary. This year helped me see that I could have a more comfortable life if I plan ahead and it also helped me to restructure my budget.
It is important to have a back-up plan and to start asking ourselves what steps we can take to achieve financial stability. We can all take a moment to review this year’s changes and see how we can implement some of the new habits we built this year that helped us save money, into the “new normal.” Maybe less eating out and more meal prep, maybe a free workout routine instead of an expensive gym, maybe less new clothing purchases, or maybe just fewer drinks at happy hour can make a difference in our savings. Saving does not always mean you need to stop enjoying the things you like or that you need to make sacrifices all the time. Small sacrifices or just figuring out what you can cut without feeling that you are not in balance can make a big difference in the long run. If your gym membership works better for you than a free workout or a long run, just find other ways to cut your expenses. It is about balance. At the end of the day, the goal is not financial stability alone, but financial stability to improve your quality of life. We can use the changes 2020 brought upon us to assess what is important and necessary for us and what we can cut or reduce to help our emergency funds grow.
I hope everyone reading this can start the new year with a clear financial plan and can feel more secure and optimistic about the future.