By Angela Dorsey
To say that COVID-19 has challenged our very way of living is an understatement. We’ve had to redefine how we work, how we gather and socialize, and how we spend our free time. Many of us have had to reckon with real fears of serious illness and economic hardship. So it’s unsurprising that most of us are eagerly awaiting the moment 2020 comes to an end.
But when January 2021 rolls around, we may be disappointed to see that we are still in the midst of a global pandemic. As we await a return to normalcy, all we can do is prepare ourselves for the continuation of the struggles we faced in 2020. Here are 4 key financial lessons to be mindful of as we enter the next chapter of this new reality in 2021.
1. Focus On What You Can Control
A frustrating and anxiety-inducing aspect of the global pandemic has been the stark realization that we are not in control. We’re not in control of how the virus spreads, nor are we in control of global economic markets and their response to the COVID-19 crisis.
But one thing we can control is our financial habits in regards to savings and spending. If it’s been a while since you tracked your spending or followed a budget, now might be a good time to start. It never hurts to understand where your money is going so you can reallocate discretionary expenses into savings accounts or emergency funds.
2. Create A Plan And Stick To It
Having a plan is a good way to help keep your emotions in check. A plan can ground you during times of stress and remind you of what’s really important when you’re not sure what to do. When creating a plan, keep your long-term goals in mind. What are your savings goals and how have you been working toward them? What is your investment plan and ideal asset allocation of your portfolio?
The answers to questions like these can provide long-term clarity during periods of short-term volatility and distress. The important thing is to stick to the plan when times get hard. Even though a plunging stock market is undoubtedly nerve-wracking, your plan will help you to stay calm and prevent you from making rash, emotionally based decisions. Don’t sell when markets get rocky, and remember that your long-term plan will last longer than a crisis-driven market.
3. Prepare For Emergencies
So many of us have seen our businesses suffer, our pay cut by large percentages, and even our jobs disappear. When these things happen, we can still find peace of mind if we’ve properly prepared for emergencies during good times and have a solid emergency fund to rely on.
How much cash do you have in case your sources of income suddenly disappear? How much non-mortgage debt are you responsible for per month that could be overwhelming if you were to lose your income?
No matter your situation now, it’s important to look ahead and anticipate what could happen in your future. The old adage “Hope for the best, but plan for the worst” seems especially prevalent during a global pandemic. Do what you can now to lower your expenses and boost your savings. The lower your expenses, the less of an emergency fund you need.
4. Practice Gratitude
Although this one may not be a financial tip, it’s a good one to remember, as wealth is about more than just finances. During this chaotic period, remember to be grateful for your good health, family, and friends. If 2020 has taught us anything, it’s that we can take nothing in our lives for granted.
Partner With A Wealth Management Firm You Trust
Partnering with a trusted wealth management firm can help take some of the fear and unknowns out of your financial decisions right now. At Dorsey Wealth Management, we work with you to tackle some of life’s biggest challenges, including divorce, death of a spouse, and—we may not have known it in 2019—a global pandemic.
Schedule a free introductory 30-minute phone call if you’re ready to create a lasting, trusted relationship with a financial planner who can provide you with a comprehensive look at your financial situation and navigate these murky waters with you. You can reach us at (310) 370-7776 or firstname.lastname@example.org.