Financial Lessons Learned in 2020
2020 has brought its fair share of challenges, but despite it all, the optimist in me always looks for the silver lining. Working at a financial institution, we’ve seen some interesting trends in consumer spending. We, of course, work every day to provide needed services to those who have experienced an unfortunate change in income. But for those whose income has remained unchanged during the pandemic, many have leveraged this year’s challenges to gain a more solid financial footing. Here are some of the ways we’ve seen our members achieve financial success in 2020 that are worth maintaining for the long-term:
Cutting Back to Necessities
When the pandemic hit, understanding the impact to personal finances was largely unknown. Although online shopping further surged in popularity, overall frivolities seemed to take a backseat. Just in conversations with others, I’ve heard many prioritizing a budget for the first time and learning what should stay and what should go. And for many, this was no easy task as the year has brought a series of changes including the shutdown, stimulus checks, job loss or change, and returning to work with reassumed costs like fuel. But the positive? People are realizing how important it is to take a good hard look at needs and wants and track expenses. In the future, any time you are tempted to spend beyond your means, think back to the freedom you felt when scaling back. We often need a lot less than we think to experience happiness.
This year forced us to cancel vacations and limit going out, right? I’m always one to encourage budgeting for what you love. Whether that’s travel, home projects, dining out — you name it. But as many things fell out of consideration, with it came the opportunity to pay down debt. Many jumped at the chance to change their life for the better. Whatever 2021 brings, I’m hopeful that less debt will allow people to begin the new year with financial hope and freedom.
Creating an Emergency Fund
If there was ever a time for an emergency fund, it would be 2020. We’ve seen a rise in member savings, presumably as the early stages of quarantine allowed many to set aside standard expenses on things like fuel and entertainment. Whatever the reason, this is an important practice for the long-term. Trust me — things happen, and I can almost guarantee you'll need to dip into those funds at some point. The main thing is, if possible, replenish your emergency fund for the next time you may need it.
Although many things were lost to us this year, we also reconnected with nature, spent time with our immediate families, and enjoyed the benefits of personal rest when forced to slow down for a period. The silver lining is that many were also able to improve their financial lives, which gives me hope that through it all, there was something positive to take from all this. And if your life was turned upside down financially by the pandemic, you're not alone. Seek out a financial partner that will help you weather the storm in good times and bad.