Covid-19 has completely flipped our lives upside down. Around the world businesses have been forced to close or limit operations, resulting in millions of people being furloughed or worse, losing their job.
Unfortunately a job for life is a thing of the past, whether it’s a global pandemic or the rise of robots, our jobs can be taken away from us in an instant. However many people are yet to wake up to this realisation. A BankRate.com survey found that nearly three in 10 people do not have emergency savings. With most Americans not having enough money to cover three months of living expenses. Highlighting that people simply do not prepare themselves for emergency situations like we’re experiencing right now.
Don’t rely on government support
Of course, governments have stepped in with furlough schemes and stimulus checks to support many of us who have been affected, but people are finding this financial support is not enough. In the US 60% of Americans say their stimulus check isn’t enough to tide them over financially during the coronavirus crisis. Had people made the effort to increase their savings before this pandemic we wouldn’t see so many people struggling.
There are also a few other issues with simply relying on government support. The first issue is that the money being handed out, will have to be paid back somehow, it’s not just free money (unfortunately). In order to try and fix the mountain of debt governments have piling up they are likely to start increasing taxes and reducing their spending. This will need to be done to create a surplus that can be used to pay back the people they borrowed from.
People that are heading towards retirement should also be careful, as governments are finding it increasingly more difficult to support retirees due to ageing populations and shrinking workforces. The financial support older generations used to receive from governments in the past is very unlikely to be afforded to you.
Living, health and care costs are also set to increase significantly, which doesn’t bode well for an ageing population. This makes it imperative that people start to increase their savings. It’s no longer wise to rely on governments to support us and it’s time we make sure we get our own personal finances in order.
What lessons can we take away from Covid-19?
- It’s not about how much you make, It’s about how much you save.
Most people’s self-worth is tied up in what they can consume. Whether it’s a fancy house, car or designer clothes. Most people accumulate too many material goods and don’t focus enough on saving/investing.
If someone is earning $100,000 per year, but most of their money goes on material items, rather than saving, then they’ll struggle whenever an emergency situation arises.
Conversely, someone who’s earning $70,000 per year, but is managing to save $20,000 per year, then they will have a much greater chance of covering emerging situations and achieving long term financial success.
The more you’re earning the better, but you have to make sure that you can retain a sizable amount of your income each month to become financially secure.
- Build multiple streams of income
It’s no longer sensible to rely on a single source of income like a job. In this digital era it’s become much more accessible to build multiple streams of revenue for yourself. Having multiple sources of income means if you ever lose a source of income, you have others to fall back on.
There are many ways you can build multiple sources of income outside a job, such as:
- Writing an ebook and selling it on Amazon
- Creating an online course
- Offer freelance services
- Offer teaching services
- Invest/Trade financial markets
- It’s not enough to just save, you need to invest
It’s very important to have money saved for emergency situations, but in order to secure long-term financial stability you must invest your money. If you continue to just save your money and not invest you will forever struggle to build up your wealth. Interest rates have been completely cut around the world, with many banks lowering rates to less than 1%. Bank interest is less than the rate of inflation, so your money will end up losing its value over the long run.
Whether it’s investing in stocks, cryptocurrency, P2P lending or AI trading solutions, they are all great ways to help accumulate money.
For most people investing in passive income streams is the best way to start building and diversifying your income sources. A great thing you can do is take part of your income and put directly into a savings/investment account each month. This will slowly over time allow your money to build and compound.
Covid-19 has now left many in the precarious position of having very little or no savings at all to support themselves. For the ones who were lucky enough not to lose their job, it’s still made many realise how important it is to have financial security. Covid-19 has been the major wake up call we all needed to start saving more.
We’re moving to an era of personal financial responsibility, and it’s important that you take ownership for your finances and understand that if you don’t save and invest your money, then you will forever struggle.
If you don’t want to struggle, then you need to shift away from immediate gratification and spending money on the wrong things to focusing on saving and investing.