The past year has been a difficult time for everyone, with many people feeling the effects of the financial constraints bought about by the pandemic and its various lockdowns.

Many people have been forced to tighten their budgets, with some taking pay cuts or experiencing furlough, redundancy or unemployment. This has put intense financial pressures on households, where, in some cases, there is now only one earner in the home.

Despite it being a challenging year for us all, we’ve been able to learn a variety of lessons when it comes to finances. Some lessons are about how we can get through difficult times, whereas others teach us how we could better manage our finances and make the most of what we have. Either way, it’s key that we take these lessons and implement them into our future financial plans.

What are the key lessons we can take from the coronavirus pandemic?

1.    The importance of financial security

The most important lesson to take from a turbulent financial year is that financial security is crucial. When budgets become stretched and incomes are reduced, it’s key to have some form of savings or a financial security blanket to fall back on. This will help to ensure your financial obligations are met.

For some, concerns may be around ensuring their family are provided for, should the worst happen.

To create financial security, you need a financial plan. This should include a summary of your financial obligations per month, as well as a calculation for how much you need to save to ensure these obligations are covered for at least three months, should your income be paused entirely.

Additionally, so your family are provided for, you could consider taking out life insurance.

2.    Keep your budget flexible

Following a year of ups and downs, with multiple lockdowns and various restrictions lifted and implemented, you may have noticed your outgoings fluctuating from month to month. Perhaps your commuting costs varied each month, or maybe your budget was tightened at some points.

The lesson we can take from this is that budgets need to have some degree of flexibility. Situations can – and do – change.

To keep your budget as dynamic as possible, allow some leeway in each section and allow for overspending in some areas. For example, your budget for leisure can change from month to month, or you may want to put more or less into savings, depending on your financial obligations at the time. It’s a good idea to revisit your budget each month to ensure it covers all costs for the month.

3.    Think about creating multiple income streams

With many losing their main source of income as a result of unemployment or salaries being cut, the importance of having multiple sources of income is clear. Relying on only one source of income means that you could be left without, should this income stop.

You can create additional sources of income by creating an investment portfolio, or even by setting up a side business in something you’re passionate about and enjoy.

 4.    It’s possible to save more than you thought

It’s likely that you found yourself spending the majority of the time at home, working from home and spending weekends in the house with family or your support bubble. For many, this has resulted in a reduction in outgoings. The daily costs of a meal deal and a coffee, petrol and leisure has likely been cut, leaving you with more money left over at the end of the month.

Many have taken advantage of this and have put aside more in savings or towards their retirement fund. To continue these savings, you could take a lunchbox to work, reduce your leisure budgets or even walk or use public transport for shorter journeys to cut petrol costs where you can.

Don’t lose the lesson

This year has been difficult for everyone, but it’s important to take these key financial lessons and implement them in your personal finances to create your secure financial future.

For more information, get in touch or call 0121 285 8528.

Disclaimer: The value of your investments can go down as well as up, so you could get back less than you invested.

Picture Source: https://pixabay.com/photos/money-profit-finance-business-2696219/