Covid-19 has quite simply brought the world to a standstill. A positive way to look at the current situation though, is that it may have actually made us better prepared for any tough times ahead.
The pandemic has encouraged us to revisit our financial goals and help us to re-evaluate our financial plans. Right now could be the perfect time to look at your overall financial picture and even make some changes.
To help get you started, here are five financial lessons to take from the Covid-19 pandemic.
Lesson 1: Have another look at your emergency fund
The most important lesson that can be gleaned from the pandemic is that having an emergency fund, to cover a few months of expenditure, may simply not be enough anymore. It is always better to have more than you need. 2020 has shown us that we should prepare for the worst case scenario, to ensure our way of life isn’t disrupted too much.
It is also important to remember why you created an emergency fund though and stick to that reason. Putting away what you can is crucial, but it should not be treated like a regular savings account or something you should dip in to in order to cover the cost of a treat. It is only there when you absolutely need it.
Lesson 2: Investing could be rewarding with patience
If you have investments, declines in your recent returns may make you feel anxious. However, market volatility is actually quite common. It’s normal for markets to go up, as well as down. It’s a good rule of thumb that if your reason for investing or your financial situation hasn’t changed, it’s usually better to stay the course in order to meet your investment goals.
During short-term falls in markets, it’s crucial to continue thinking about when you’ll actually need your investments. Sticking to your plan could help you achieve the positive long-term investment returns you’re hoping for. Making snap decisions and withdrawing your money too soon, and ultimately before the market has a chance to bounce back, could mean missing out on returns.
If you’re not investing at the moment, it could be a good option to consider for building up your money. It takes time, patience and resilience to grow a portfolio. Investing is a focused endeavour, that does put your capital at risk, but it also offers the potential for stronger long-term gains.
Lesson 3: You may be able to save more than you thought
Covid-19 has provided many of us with a crash course in just how much money we’re able to save. This has been highlighted by the rise in disposable income and households saving to an all-time high of 29.1%.
This spike can be largely attributed to the closing down of large parts of the economy, meaning a lack of options for spending our money. It was only a matter of months ago when cash flow activities like restaurants, clothing and travel were regular spends. How times have changed.
If you’ve found yourself with more spare money during the pandemic, this could be the ideal time to squirrel away some of that unused monthly income and make it work for you.
Lesson 4: Financial wellbeing is the key to emotional wellbeing
While family, friends and health are the most important aspects of our lives, we all know that feeling anxious financially can have an effect on us. Feeling emotionally secure and supported can ground us, and in turn help enable us to make better, more measured financial decisions.
There is a strong correlation between finances and mental health. Research by the Money Advice Service found that of those who currently have some form of financial issue, 38% of them had felt anxious, and a third (34%) had suffered from stress, depression (29%) or mood swings (21%).
Feeling more secure financially can contribute positively, to your piece of mind.
Lesson 5: Look to secure your financial future
The current pandemic has created an environment where concerns for our loved ones’ health and safety are always on our minds. It has also made many of us appreciate that we’re not invincible, and sometimes we can’t control our future.
Of course we can’t foresee what is waiting around the corner, but we can all financially prepare to help protect what are the most important things in life, should the worst happen.
As an example, according to research from Canada Life , a staggering 59% of UK adults do not have even a basic Will in place. This is a worrying statistic that equates to 31 million people. It means that their property, finances and other assets could be left to someone they have not chosen, when they die.
Let’s talk about you
NAHT Personal Financial Services are here to support members like you through financial advice. They’ll take the time to understand your circumstances and goals, and your attitude to risk, to offer personalised recommendations – with no pressure to act.
They offer appointments over the phone – or via an award-winning and easy to use, video link service.
This video service gives you the opportunity to have face-to-face appointments from the comfort of your own home. Where you can discuss the various financial options available to you. All you need is a computer, laptop or tablet with access to the internet to get speaking to a friendly face. It’s as simple as that.
If you would like to discuss using the video service or to book an appointment, call 0800 121 4596 for more information.
Capital at risk.