It’s been a few months since the COVID-19 pandemic taught us what staying home for an extended period of time actually looks and feels like.
“Like everything in life, every challenge and every hardship is a lesson to be learned,” says Eric Simonson, certified financial planner and owner of Abundo Wealth based in Minneapolis.
Here are three pieces of money advice you can apply to your bank account, budget and lifestyle as life evolves after lockdown.
• INSULATE AGAINST AN EMERGENCY
Financial experts believe this pandemic has illuminated the pressing need for emergency funds and cash reserves.
“Financial advisors for years, I think, with a lot of people, could talk until they’re blue in the face about why an emergency fund is a good idea,” says Kevin Mahoney, CFP, founder of Illumint, a virtual financial firm based in Washington, D.C.
Now, job losses, furloughs and medical emergencies have provided a tangible example of why these funds are so important.
The general rule of thumb for an emergency fund is to have three to six months’ worth of living expenses saved. That may or may not be enough, depending on the circumstances. If you’re able, save something now. Even $500 is a good start.
• PREPARE (DON’T PANIC)
Emergency readiness will likely also extend to home pantries. For better or worse, when frenzy sets in, consumers begin panic shopping. Americans have seen the repercussions of that firsthand — disinfecting wipes are still difficult to come by.
Forward-thinking consumers will likely begin to accumulate a reasonable amount of essential supplies or stock an emergency kit in case they’re ever again unable to leave the house for an extended period of time.
“Consumers will adopt a mindset of ‘sufficient stockpiling’ as their awareness of life’s uncertainties has been magnified due to COVID-19,” Ross Steinman, professor of consumer psychology at Widener University in Pennsylvania, said in an email.
While there’s no need to hoard, it may be beneficial to prepare in case other people once again panic shop for food and essentials at the onset of future emergencies.
• SHIFT YOUR SPENDING
Monthly expenses will likely also look different moving forward. Mahoney believes the stay-at-home orders have acted as a budget reset for many.
“It’s hard to press pause on spending habits that you’ve had for many years,” Mahoney says.
But for months now, most people have been left with no choice other than to stop traveling, dining out, attending concerts and going to the movie theater.
