No one could have anticipated the pandemic. We all got caught by surprise.
Since the beginning of the pandemic, we have learned some lessons on how to build a resilient portfolio and lifestyle to survive and confront many other financial and life uncertainties.
Let’s take a look at the lessons we have learned and how we can continue to adapt until the pandemic is gone.
Stocks are the best investment for your money but they are volatile
The S&P 500 saw a drop of 34% from February to March. One of my good friends saw a video by some guy on YouTube, telling everyone that they should sell, and she sold (at a loss). Another investment expert (on LinkedIn) with a CFA designation and an MBA was also telling everyone to sell, explaining his reasoning in financial lingo. Those who listened to him also got out at a loss.
It’s easy to accept volatility when markets are going up. It’s more difficult to accept it when markets are going down, but this is a reality we have to accept when investing in the stock market. Markets go up and markets go down, and the pandemic highlighted that.
History has shown us that long term, the stock market is the best place to put our money, but the price of entry is to withstand volatility.
After I built some courage, I bought some stocks at discount prices. I didn’t get in at the button, but if my holding period is forever, then buying stocks at a discount makes total sense to me. I am able to tolerate the volatility and I am happy with my new gains.
If you have a disability, make sure you get proper help
During the pandemic, many people with disabilities got caught off-guard. All of a sudden, they lost access to many serves and activities necessary for their everyday life.
Most of us will need help one day, for that reason, it’s important to be aware of the products and services available to us. For example, NDIS Service Provider In Sydney, Care For Family is one of the leaders in the industry. I am sure that there is an equivalent service in your geographical area.
Good credit is always important
Central banks in the US and Canada have brought interest rates to record levels low. Some countries in Europe and Asia have negative interest rates.
If you have good credit, this is a great opportunity to borrow at these low-interest rates.
As I mentioned above, I bought some stocks at a discount. I didn’t have the money, but I have good credit, so I borrowed money at a 4% interest rate from my broker and I was able to make that purchase. It only took me a few clicks on my computer and the whole deal was done.
Emergency funds will save your butt
All my life I have been downplaying the need for emergency funds. I have stocks that I can sell with a few clicks and I have a line of credit, so I didn’t see the need to have a big emergency fund. But this pandemic helped me see things differently.
By having at least 3 months of emergency fund money, I felt secure and confident. I didn’t panic, and I was able to focus on studying opportunities as opposed to having to worry about my own survival.
My new mindset is that emergency funds are fundamental in everyone’s financial plan. It’s like that spare tire in the trunk of your car; most of the time is dead weight, but you will be so happy to have it if you ever have a flat tire and there is no one to help you.
Always live below your means
The other day, I was having coffee with a group of friends. One of them is a nurse. She was telling us that finally, she got a raise from her job and how she was going to spend the additional money. The first thing was to buy a new car, and then she went on to mention some other things.
My friend, as a nurse, she has a secure job, but if she is always spending all her money, she will never have financial security. In order to have financial security, we have to live below our means and put money aside for emergencies, for retirement, and for the unexpected things that life throws at us.
One of the challenges savers may experience is lifestyle creep. As our incomes rise, spending tends to rise as well. The result may be a never-ending cycle of limited saving capacity. So, now may be as good a time as any to set up a regular savings plan and make sure you are always living below your means.
The worst could happen to all of us
Many people know someone who has contracted COVID-19. Some have been relatively unscathed, while others have become quite sick. Some have died. This is a good reminder that everyone, even young, healthy people should plan for the risk of disability or death.
The best way to mitigate these risks, at least financially, is with insurance. Any working-age person who is not financially independent should have disability insurance to replace their income if they cannot work. Disability insurance pays a monthly benefit to a disabled recipient.
According to Lin Sok, an insurance broker based in Montreal, life insurance companies has not changed their prices due to COVID. “I know that COVID questions have been added recently to life insurance applications but that’s it. In that case, the applicant will either have a rated premium (higher premium) or be declined.”
Anyone with financial dependents should also have life insurance. Life insurance pays out a lump sum benefit to replacing someone’s future income for their family.
Wills, powers of attorney, and similar estate documents should be a consideration for any adult, even if they do not have dependents.
I have the habit of writing my will at the beginning of every year. It gives me peace of mind to know that if something happens to me, there are clear instructions on what to do next.
Conclusion
Doom and gloom aside, COVID-19 may have taught some of us about the importance of living for today as well. Life is short. I have witnessed first-hand, those who have saved diligently for a long retirement that they will never enjoy. So, while saving and delayed gratification is important, living for today is also important.