2020: A Year Unlike Any Other

Life has its surprises, both good and bad. During the breaks between smaller-than-normal holiday gatherings, it’s important to pause and reflect on the year that will (finally) come to an end. COVID-19 came without a playbook and left a wide wake of health, economic and personal issues, and we’re still adapting to its everchanging curve balls.

In addition to the toll on health and lives, and the economic and business disruption from the pandemic, we’re grieving the reset of ‘normal.’ However, the pandemic has served as a wake-up call for many to prepare for life’s challenges. Here are 6 key lessons from the year that can be valuable to navigate the future.

Establish Financial Safety Nets

It can be foolish to believe that bad stuff happens to “the other guy,” but not to you. Even “essential” workers suffered income interruption from reduced work including business slowdowns or falling ill. Maintain sufficient cash reserves personally and in the business, keep insurance coverages up to date, and check your business continuation plans to name a few. Follow a written plan that helps you achieve your desired outcomes, navigate through your stages in life and adjust as needed.

Be Smart with Debt

Debt can be a tool, but it can also weigh you down. According to a survey by CreditCards.com, 62% of card holders feel they’re in danger of missing payments if the pandemic continues. And millennials are especially concerned – 25% took on more debt due to the pandemic. Develop a debt-reduction plan, budget to get control of your money, adopt a debt snowball method, and once the debt is gone, redirect the payment into your savings.

Time is One of Your Best Friends

It’s common for investors to panic during selloffs despite the Buffett-like advice to ride out storms and don’t try to time the market. It doesn’t mean you always stand still in market declines, but often patience is a virtue. $10,000 invested for a twenty-year period in an S&P 500 Index through November 30, 2020, grew to about $40,800 (7.3% per year excluding dividends). But if you missed the top ten trading days, you accumulated less than half – about $18,700 (or about 3.2% a year). Bear markets are common. Since 1926, there have been 16 bear markets (20% decline or more). They come about every 6 years, last an average of 22 months with a decline of 39%. This year the S&P 500 fell about 34% and recovered in a short five-and-a-half months.

Some of the Best Things in Life are Free

Check out your 401(k) options at work. They can be great tools for retirement and paying less taxes. Also, they help counter some of our faults as humans – procrastination, fear and greed, and indecision. Use their automatic features including auto enrollment, limited investment choices, and rebalancing. Money comes out of your paycheck before you have a chance to spend it, money is invested, and you’re buying low and selling high.

Lighten you Load

Several charities reported record donations as people decluttered. It may have been due to boredom, spring cleaning, or taking up a new hobby. It also included going digital with important records and photos.

Refocus Your Energy

Stress and anxiety rose from finding hand sanitizer, social distancing from our loved ones, business shutdowns, and more. Relief and success come from focusing on the things that matter and the things you can control like having a plan, saving and investing, cooking at home, exercise and washing your hands.

2020 may be a year to forget, but hopefully there have been silver linings. Remember the words of Epictetus, “It’s not what happens to you, but how you react to it that matters.” I hope you and your loved ones emerge from the wake of COVID-19, possibly bruised but not beaten. And may sage advice help you secure your future wisely.

This article can also be viewed at the Reno Gazette Journal.

About Brian Loy

Brian Loy writes insightful and inspiring articles about the ever-changing world of personal finance and the global trends that affect the risk and return on investments and shape the financial- and retirement-planning process.
This entry was posted in Planning Tips and Goals. Bookmark the permalink.

Comments are closed.