Most of us will likely be happy to see 2020 come to an end. A new year represents a fresh start, where things should get better as the pandemic and lockdowns end, and the economy gets going again.
But we shouldn’t put 2020 completely behind us. There were some important lessons we learned this year, which we should bear in mind as we go forward.
1. It pays to plan for the worst
Our budget counseling always recommends establishing an emergency savings fund. This year proved conclusively how important that goal is.
Let’s not get caught without savings again; build up an emergency savings fund and keep it intact in case some future crisis disrupts the economy the way the COVID-19 pandemic did.
We talked at length about emergency savings in “How to Start an Emergency Fund to Prevent Debt”. The important thing is to have enough to get by if your income is disrupted; don’t leave yourself in a position where you are tempted to use credit as a substitute for income.
2. Make it a goal to borrow less money
We talked with Dann Albright of Motley Fool recently about household debt trends in 2020. Surprisingly, the numbers show Americans holding less credit card debt than in prior quarters.
That’s a good thing, but as we said at the time, this belt-tightening is a sign of financial instability, as consumers worry about their financial futures.
We urge everyone to keep that belt tightened as the economy recovers. 2020 taught us we can borrow less and get by, so keep doing that, even if your finances improve.
You can use these free financial goal planning tools to help you borrow less and save more. We know now that it can be done, and it shouldn’t take a global pandemic to get us all to act.
3. Popular goal: become a homeowner
According to GlobeSt, 28% of millennials who don’t own a home are now more interested in purchasing one due to the pandemic. Among older generations, 20% of those who don’t own a home say they are now considering home ownership.
The statistics bear this out, as home sales have been much higher than expected in the summer and fall of this year.
Part of this is surely due to lockdowns—if there is a possibility you are going to be confined to your home due to a pandemic, it’s better to own a home of your own, as many people seem to have concluded. We also have always known that home ownership represents financial security—planning to own a home by the time you retire is a critical way to prepare for your golden years.
We’re happy more people are on board with home ownership, and we want this lesson to be another one that is remembered going forward.
Owning a home helped a lot of people make it through a tough year, and along with an emergency savings fund, it can help you weather future crises.
4. Have adequate insurance coverage
Life insurance applications have risen due to the pandemic, but it shouldn’t take a crisis to convince everyone how important adequate insurance is.
In our Basics of Financial Planning workshop (pdf), insurance is the first of the six priorities we urge consumers to set. Besides health insurance, auto insurance, and homeowners insurance, we recommend disability and life insurance as part of any complete financial plan.
The pandemic woke many of us up to the need to re-evaluate our finances, including insurance. People who have put off shopping for the right coverage should remember the events of this year so they don’t make the mistake of going unprotected in the future.
For homeowners insurance, learn more from our article “6 Ways to Save on Homeowners Insurance.”
5. Stay physically and mentally healthy
We learned this year that staying healthy is important to withstanding a viral outbreak. The coronavirus was especially hard on those with pre-existing conditions like kidney disease, heart disease, COPD, diabetes, or more.
Being healthy and addressing any wellness issues that are under your control will make it easier to resist any contagions the future may have in store for us. Having a supply of masks on hand will probably become the norm going forward, though hopefully we won’t need them again like we did over the last year.
Physical health is a weighty category of its own, and your doctor is the best person to advise you there. But some basic tips are universal:
- Eat the right foods—avoid too much salt, sugar or processed foods, and eat more vegetables.
- Drink in moderation—alcohol can lead to dependence, mental and physical health problems, and make you less safe.
- Don’t smoke—don’t even smoke in moderation. Just quit. It will save you money and improve your health.
- Get vaccinated—prevent any diseases you can with regular vaccines for you and your family.
- Wash your hands—we learned this year that most of us were not washing thoroughly enough. Let’s not backslide here.
- Be physically active—the more active you are, the more the health benefits pile up.
- Get good sleep—make sure you sleep enough, and make sure the sleep you get is high quality to improve your overall health.
- Get some sun—Vitamin D is important to your immune system, promotes weight loss and reduces depression. Sunlight makes your body generate its own Vitamin D.
Besides helping you better withstand illness, being healthy saves you money. In addition to reduced costs for prescription drugs and healthcare, bad habits like smoking and unhealthy eating can be expensive. Making your own healthy meals at home is cheaper (5 times cheaper) than dining out. Insurance will cost less if you’re healthier, and maintaining a stable weight means less shopping for new clothes.
Let 2020 remind you how important it is to stay healthy and keep this as a priority throughout your life.
6. Shop wisely on a budget
We urge everyone to budget their paychecks, and we offer free educational resources to help. Shopping smart means having a plan for every dollar you spend.
This is definitely something we learned during the coronavirus pandemic that can continue to serve us going forward. The future is uncertain, so budgeting is always important, no matter how comfortable things may seem.
Beyond shopping with a budget, shopping wisely means having enough necessities on hand to get through a crisis. Everyone who struggled to find toilet paper on store shelves in the spring of 2020 now knows to never let themselves run out again! Think about the things that you would want a surplus of in case of another crisis like COVID-19, and have a plan to stay stocked up on them going forward.
Finally, shopping wisely also means finding good local sources of goods and patronizing them. Small businesses have suffered greatly due to the pandemic and ensuing lockdowns, and a world where we have to order everything online is not better for us than what we had before. Keep some of your shopping local and help small businesses in your area stay afloat so they’ll be there when you need them. Shopping locally is better for the local economy, the environment, and your community.
7. Get financial help when you need it
Whether it’s your physical or mental health, or your personal finances, you don’t have to go it alone. Sometimes circumstances require you to reach out and get assistance.
We help people who want to become homeowners through home buyer coaching, as well as foreclosure prevention, reverse mortgage counseling, and other kinds of HUD-approved housing counseling.
And anyone with credit concerns can get free credit coaching, or talk to a certified financial coach for a credit report review. Take action to correct any damage done to your credit by the pandemic so you can build back healthier personal finances.
We’re also available with free debt coaching for anyone who wants help coming up with a plan to achieve financial freedom.