While I didn’t learn to love putting together puzzles or take up baking sourdough bread during the pandemic, I did become a pro at Instacart, got familiar with several videoconferencing software packages, and rekindled my pre-kid reading habit. Another thing that I learned is that tough situations can teach us all some lessons. Here are six money lessons that I learned while stuck at home during the COVID-19 pandemic.
You really *do* need an emergency fund … and it’s OK to use it.
We talk all the time about the importance of a rainy-day fund at Military Saves, but this was one of those instances when there really was a worldwide emergency. While I hate to use the word “unprecedented,” the worldwide crisis was unlike anything I have ever personally experienced.
It highlighted that we really do need to have some sort of cushion in case we have a loss of income or can’t work, whether it’s because we are sick, our workplace has shut down, or we can’t find childcare.
And for those of us who did have an emergency fund, we sometimes found it hard to convince ourselves to dip into it. So that became another, follow on lesson: it’s perfectly fine to empty your emergency fund, as long as you have a plan to build it back up again later.
Go with the flow – the cash flow
Having a good grasp of income and expenses became crucial during the pandemic. While I don’t always track my expenses in excruciating detail each month, it is a good idea to periodically have a financial “reality check.” The pandemic called for an overhaul of our family budget, and we were able to shave off a few expenses like subscription services that we didn’t really want or need.
A good way to track expenses is to save receipts (or look at your transactions online) for a few weeks. Then enter the data in this Spending and Saving Tool to get a clear picture of your financial situation.
A sinking fund might not be a bad idea
Once you have a good grasp on your true monthly expenses, you may start to realize that there are certain large, recurring costs that happen over the course of the year. For example, because my husband’s birthday is in January, our vehicle registrations must be all renewed at the same time, right after the holidays (ouch!). Property taxes, insurance premiums, tuition payments – these are all large expenses that may come due over the course of a year.
When corporations know they have a debt to pay off at some time in the future, they will set funds aside in a sinking fund. You can do the same thing: if you know you have a large expense on the horizon, start putting aside the money bit by bit in an earmarked account. That way your spending plan won’t be completely derailed by an emergency.
Eating at home can save A LOT of money
Just prior to the pandemic, the average American ate out 5.9 times a week. In 2019, according to the Bureau of Labor Statistics, households spent an average of $3,526 on meals outside the home (only about a thousand less than meals inside the home!)
Then when the whole world shut down, we were all forced to eat at home a lot more. Yes, my grocery bills went up, but I noticed I still managed to save a lot. I’m not saying that we shouldn’t support local businesses by occasionally getting take out or eating out, but scaling back in that area saved my family hundreds of dollars last year.
Mindful spending is a thing
There was a time when I found shopping fun – I would aimlessly stroll through the mall window shopping or explore the end caps at the big box department store looking for clearance deals. Shopping during the pandemic was done mostly online, and the few times I went into a store it was more like a surgical attack strike: I would head in for a particular item and then quickly check out and leave.
Now that restrictions have eased and I’m back at the stores I have found that shopping just isn’t as amusing anymore. I realized that I saved a ton of money by only buying the things I needed, and I learned that experiences, not stuff, made me happy. Now I’m a mindful spender and really weigh whether I need an item before I purchase it.
Even if you’re not rich, you need an estate plan
I hate to end on a down note, but the pandemic brought our mortality into pretty clear focus. It made me realize that I needed to update (or at least check on) a lot of things – like our wills, powers of attorney, and beneficiaries on accounts and insurance policies.
It’s also important to have a binder, or at least a letter of instruction, with information on key documents, accounts, and policy numbers. If you have young children, you’ll also need to have a plan for their care. And a living will/advanced medical directive should be included as well. Your installation’s legal services office is a great first step when you’re looking to create an estate plan.
These money lessons are part of what I’m considering the silver lining of this terrible past year. I don’t know that I’m a completely changed person, but I certainly am a more thoughtful spender and consumer of goods.