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What Financial Planners learned from the pandemic

Five money lessons from the pros

Among countless other things, the past year has forced us all to look a little closer at our budgets and savings account balances. During the pandemic, millions of people were furloughed or lost jobs and had to figure out a way to make ends meet. For those fortunate enough to keep their job, there was still a sense of urgency to stash every penny in case a loss of income was around the corner.

Now that we’re approaching the other side of the pandemic, it’s as good a time as any to take steps toward preparing for the next possible health or economic crisis. Toward that end, we asked financial experts to weigh in on the lessons they learned from the pandemic, with the idea that their takeaways could fuel our own. Here’s what they had to say about preparing for your own economic recovery after a crisis.

In this article:

Lesson #1: Saving “rules of thumb” may not be enough for a real emergency.

Experts have always emphasized the importance of saving for a rainy day, but how much should you have stashed away if there is another COVID 19 pandemic? It varies. “The pandemic proved that one-size-fits-all financial advice hardly fits anyone,” said Cody Garrett, a  financial planner and founder of Measure Twice Financial.

The general rule of thumb has been to have three to six months’ worth of expenses set aside in savings for emergencies, but that wasn’t enough for many families who experienced job loss and medical bills throughout the pandemic. Going forward, Garrett recommends calculating how much emergency savings you need based on personal financial risk. Also, consider your insurance deductibles and discretionary income to figure out how much cash would be sufficient to provide financial stability in the event of another long-winded emergency like the COVID 19 pandemic. If you have to provide for a family, consider the costs of child care, schooling, and any other important factors for your proposed budget.

As far as how to start saving, Garrett suggests a unique approach. “Most of us pay our monthly bills and save what’s left, but I recommend that families do the opposite,” said Garrett. Put aside what you need for short-term and long-term goals first and then pay your bills with what’s left.

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Lesson #2: Where you save your money matters.

The importance of stashing emergency savings in a safe, non-volatile account is not necessarily a new piece of advice from experts. However, the pandemic provided an all too real case study that illustrates why putting the bulk of your savings in long-term vehicles can be risky.

“Many terminated employees were required to distribute investments to meet basic income needs during the pandemic,” said Garrett. They were essentially forced to sell at a time when the stock market was dropping like a knife.

If you must withdraw cash while your investment plunges in value, you could end up with less money than what you put in. The purpose of creating a proposed budget for emergencies is for your money to be there when you need it—that’s why it’s important to stash funds in a place that offers stability.

The trade-off for the stability of certain accounts (specifically savings accounts at banks) is that the return is low. However, you might find that online banks offer a higher annual percentage yield (APY) on accounts than brick-and-mortar banks, so it could pay off to shop around when looking where to hold your funding accounts.

Lesson #3: Unprecedented times present an opportunity to re-evaluate priorities.

Many people experienced a financial loss during the pandemic, but some people saw a financial gain because they spent more time at home and less time spending cash on non-necessities.

“A lot of my clients realized how much of their money was going towards simple busy-ness before the pandemic,” said Landon Loveall, a financial planner at KB Financial Advisors who advises young professionals in San Francisco. After all, money spent on commuting, lunch at work, or dry cleaning can add up, and the pandemic forced people to go back to basics.

According to Loveall, now is a good opportunity to review the last 12 months and think about how you want the next 12 months to be. Could you continue living without some of those past expenses? If so, what could you do with that money instead? Could you afford an extra car bill? Would you need to look into hiring child care providers so you can peacefully work from home? Think about what your budget plan would need to include in order for you to continue to live your normal life.

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Lesson #4: The way we work and communicate is changing—keep up or risk getting left behind.

The job market of the future may not return to exactly what it was before, and that’s something experts say to prepare for. “Many jobs lost in the pandemic are not coming back and it may be harder to find a new job,” said Angela Dorsey, a financial planner and founder of Dorsey Wealth Management.

If you’re still in the workforce, Dorsey recommends continuing to keep your skills current so you can remain competitive. Thanks to alternative learning options, you may not have to go back to school and take on new student loan debt to make this happen.

Organizations and associations related to your profession might offer advanced certifications. Udemy is a website that has over 100,000 affordable courses on business, design, marketing, and more at affordable prices. Coursera is an online platform where you can take courses from top universities, such as Yale and Stanford. Google recently launched professional certificate programs for project management, Google data analytics, and UX design on Coursera as well.

Financial professionals are also adapting to the changing world. During the pandemic, Julian Morris, financial planner and founder of Concierge Wealth Management, had to transition to digital communication. “This meant beefing up our tech stack so clients could reach us through apps, text, email, phone, video—you name it—we are reachable there,” said Morris.

Now his company delivers advice through video conferences and screen sharing. Action steps are delivered to clients through an email summary. If you’ve ever considered working with a financial planner but didn’t have time for in-person meetings, you might find that many have opened up virtual alternatives.

Lesson #5: Plan for the future, but also enjoy today.

From childhood, we’re focused on the future. We work hard through grade school and college to get a good career. We save money during a 30- or 40-year career so we can eventually retire and ride off into the sunset in a red convertible.

The pandemic put those plans on its head. Almost overnight, our focus turned to the health, safety, and well-being of our family now. The spread of an unknown illness was a stark reminder that tomorrow (and the future) is not promised.

Matt Reiner, a financial plannerand partner at Capital Investment Advisors, said the biggest shift he’s seen from the pandemic is a change in individual’s mentalities—they want to have more experiential expenses. “They have seen the fragility of life through the pandemic and want to ensure they have an ability to live their life through meaningful experiences.”

If you’ve been putting off that family trip, the beach vacation, or the cross country road trip, being forcibly grounded for a year might have inspired you to iron out the details. Going the YOLO (you only live once) route and planning all of the trips at once could derail your emergency savings or long-term savings goals and lead to a financial deficit. However, balancing both desires—short-term reward and long-term stability—may be possible if you establish a financial plan.

Budgeting and saving are still the names of the game.

Lessons learned from the pandemic brought some nuance to financial planning, but the main pieces of advice remain the same—everyone needs a budget and a bit of money socked away in savings. As the globe reopens, there will be more opportunities for us to experience life again—which also inevitably involves spending more. Coming up with a spending, saving, and debt repayment plan now could help you make the most of today while preparing for tomorrow.

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About Taylor Medine

Taylor Medine is a personal finance writer who's covered all things money for the last six years. Her work has appeared on Business InsiderCredit KarmaMSNUSA Today, and much more.

Read more by Taylor Medine

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Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

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