The COVID-19 pandemic challenged everything we thought was stable, including historically successful financial strategies. When the tragedy struck, these methods could not withstand the damage caused by the pandemic, leaving many people in dire straits. GOBankingRates spoke to several financial professionals about how we can revise our saving, investing and retirement practices to withstand the worst of circumstances.
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Man who counts cash
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Create multiple streams of income
Many people searched for the COVID-19 hit unemployment benefits. While unemployment benefits can last you for a while, there is a limited amount of time you can count on. They can also be well below what you’ve earned from your job. Whenever you have the opportunity, it is best to always have more than one source of income. That way, you don’t have to turn to unemployment benefits to survive when a flow of money is cut off.
Scott Nelson, CEO of MoneyNerd, adds that diversifying income can be even more beneficial than being frugal. “The biggest misconception about personal finance is that making pennies will never be more valuable than making them,” said Nelson. “The real key to financial freedom is to grow, not trim. The reason earning is so much more important than being frugal is because financial growth is exponential while there is always a cap on how much you can save when you are cheap. ”
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Diversify investments
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Similar to creating multiple sources of income, you want to deposit your money in different locations for growth. As we saw in 2020, the stock market isn’t always a stable or definite investment, so anyone who made 100% of their investments in stocks has had to lose money. Conversely, there is always an opportunity to make money when you distribute your investment money.
If you’re not already investing, Haley Tolitsky, certified financial planner, says you should make it a personal goal to speak to a financial professional to help create a diverse portfolio. “The best time to start investing is NOW,” said Tolitsky. “You can’t time the market. The earlier you invest, the more time your money will have to invest. Set up automatic monthly contributions to your investment account to make the process easier. “
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Increase the amount in your emergency fund
The gold standard for a rainy day fund was typically 3 to 6 months of income. The coronavirus has shown us that the amount of money flows fairly quickly in difficult conditions. That’s because this number is based on the average job search time, which used to be 3 months. However, after the massive layoffs last year, that timeframe has changed and the time between jobs can now be up to a year. Consequently, DotCom dollars CEO Allan Borch recommended doubling or tripling the ideal amount of money in your emergency fund to prepare for the worst. “If you fill your emergency fund with the value of your entire annual income, you will have more time to find a new job, definitely if you are unemployed,” he said.
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Make use of flexible working conditions
One of the many consequences of a slowing economy is the possibility of late retirement. Some people fear that they may have to retire because they didn’t work or didn’t contribute to a 401K in 2020. However, if you’ve secured yourself a workplace that allows you to work from home, there may be a workaround. “With more opportunities than ever to work from home and flexibility in the workplace, many people may consider working longer hours, at least in part, to help finance their retirement,” said Tolitsky. If you are willing and able to work longer hours now to save more for retirement, you can save years in the long run.
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This article originally appeared on GOBankingRates.com: What The Pandemic Proved Wrong, How We Viewed Money
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