laflor | E+ | Getty Images
After experiencing a year that I am sure we would all like to forget, there are definitely some financial lessons learned from 2020 that we should use in our day to day lives going forward.
The most significant thing about experiencing events that are statistically very rare, such as a pandemic, quarantine and economic recession all happening at the same time, is that we learn how bad things can really get and how to set up ourselves to never be in that position again.
One financial lesson from 2020 is to not depend solely on just one income. Even though a job gives you financial stability, having only one source of income in today’s world is, unfortunately, very unstable. Whether you have been at that job for a very long time or not, having one income is too close to having no income.
During recessions and economic downturns, it is normal and expected for unemployment numbers to rise. In April 2020, the unemployment rate rose to a peak of 14.7%, compared to the 3.5% rate in 2019.
More from Personal Finance:
Millions would get pay raise from a $15 minimum wage
Many have waited over a month for last round of unemployment aid
How the average stimulus check could change under Biden vs GOP plans
The wisdom of creating a “side-hustle” or e-business, or even securing a second job, is a big financial lesson from 2020. Having a second stream of income to help with expenses or, ideally, help build your emergency reserves, is great. It is also a source of income you control.
Another lesson we can take away from 2020 is to ensure that we always have at least three to six months’ worth of living expenses saved as an emergency reserve.
While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income and dependents, the rule of thumb is to put away at least three to six months’ worth of expenses. At least three months’ worth of expenses should be readily available for bills or unexpected expenses without having to rely on credit cards or high-interest loans.
According to research, the average amount of time it takes to find a job is about nine weeks, and, of course, during tough economic times, it can take much longer to find employment.
As a result, having sufficient funds in your emergency account to support your family is a must. This will give you some flexibility to help pay bills while you seek employment.
Another lesson is to always be an investor and not a trader.
What exactly does that mean? Many people assume that once they put their money into a stock, bond, or mutual fund, it all falls under the same umbrella, which could not be further from the truth.
Most investors usually create a financial portfolio based off their life goals, age, risk tolerance, time horizon and so on. First, they take an inventory of who they are and what they are ultimately looking to accomplish from investing
Then they…