5 Money Lessons Learned From the Pandemic

Before the pandemic, I was in a good place. My retirement account was topped up, I had a fair amount of savings, and I just had a record year of income. I was ready to take a step back and find that work/life balance that had been eluding me for some time. Then the pandemic happened.

Like many other people, I didn’t think much of COVID-19 when it first started to make headlines. However, once the worldwide shutdown happened, I quickly realized that things would be quite different. Sure, I knew health and safety would be at the top of mind for everyone, but I didn’t realize how the pandemic would wreak havoc on my finances. 

I should have been more prepared, but now I know I made some mistakes. The good news is that I’ve learned some money lessons during this global lockdown, and now I’m sharing them with you.

You need a bigger emergency fund

One of the golden rules of personal finance is to have an emergency fund. As the name implies, an emergency fund is for emergencies such as health issues, unplanned repairs, or if you lose your job. COVID-19 caused a global financial crisis, and many people across the world were laid off. I personally saw a drop in income of about 75%, so I understand how important it is to have savings.

The question is, how much should you have saved in your emergency fund? Pre-pandemic, having 3-6 months’ worth of expenses set aside was the right amount. However, as many people have learned, getting another job may take much longer than that.

I’m upping my emergency fund to 12 months’ worth of expenses, but I’m calculating things a little differently. The amount I’m saving assumes that I’ll adjust my expenses accordingly if I see a massive drop in my income. That means reducing or cutting my services and costs to the bare minimum. In other words, I’ll be saving more, but I also know that I may have to cut back on my spending if my income drops again.

It’s way too easy to overspend online

 

 

During the pandemic, non-essential stores were closed for some time. While this was great for public health, it hurt my wallet as I did more shopping online. It’s not like I never shopped online before, but I ended up spending more because I was buying things I didn’t need out of fear.

First, I loaded up on groceries. This was a rational decision since I thought it would make sense to stock up on a few items. Plus, I had a PC Optimum Insiders membership that earned me more points. Then there were things for my young daughter. Usually, we would try things on in the stores to see if they fit, but since that wasn’t possible, I was buying two sizes of the same thing. Yes, I could return it later, but I was still tying my money up.

The other thing about shopping online is that you make the decision in a few seconds. I would find an online store, and I would have done all my shopping in a short period of time. Compared to before, when I went to the mall, I would often think twice about what I was picking up to purchase. I would usually say to myself; do I really need this? Half the time, the answer was no, so I walked away without spending any money. 

There’s no reason to be loyal to your bank

I’ve been using the same bank since I was a child and I’ve been mostly happy with their service, but I had grown tired of all the fees. You have account fees, transaction fees, ATM fees, and more. Those fees can add up, but there’s a simple solution. Use a digital bank.

The concept of digital banks is nothing new. Since they have no physical locations, they can pass the savings onto you. That usually meant no fees for your daily banking needs and a higher interest rate. I looked into a few high interest savings accounts in Canada and quickly realized that EQ Bank was a good fit for me.

Many banks have closed their branches during the pandemic, so the convenience factor is less important. If you’re going to do your banking virtually, you might as well do it with a bank that has no fees.

Always have your taxes up to date

I’ve always done my taxes on time and paid what I owed, but I’ve learned that not everyone is on top of their taxes. Some people may have forgotten to file, while others may be purposely avoiding them, but filing your taxes has never been more critical.

During the pandemic, the government offered various financial assistance programs to help people who have been laid off or saw decreased revenue. In most cases, your tax records were used to determine if you qualified for these benefits. You would also be paid out directly by the tax authorities. If you didn’t have your taxes up to date, you likely wouldn’t be able to apply.

The good news is that you can always file your taxes later, but filing on time is ideal since it’ll help prevent any potential penalties.

Having insurance is important

The outbreak of COVID-19 reconfirmed how important it is to have adequate insurance in place. Once countries started to announce that they would be shutting down borders, travelers around the world scrambled to rearrange their flights, so they could return home in time. Quite often, this meant paying for a flight they didn’t anticipate having to take. However, if you had travel insurance, you may have been covered, which would have allowed you to take off with a little less stress.

As the death count related to COVID increased at home, I was glad that I had a life insurance policy. In a worst-case scenario, I knew my family would be getting some financial assistance. Insurance is one of those things you never hope you’ll never use, but you’ll be glad you have it when you need it.