And how can we use these lessons to be smarter in the future?
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The opinions of the employees of s You are personal.
Text messages, emails and emails reached me quickly and everyone expressed similar concerns: My finances are in trouble. Apparently our world was turned upside down in a few weeks. A public health emergency spread across the world, devastating nations, cities and neighborhoods. Mexico was not immune: markets collapsed, jobs disappeared and, above all, people were killed.
During this time, many sat at home wondering what could have been done differently and how this knowledge could improve their future decision-making. Financially, this crisis has drawn a lot of lessons that we would rather not have learned the hard way. It shouldn’t be about stopping unfortunate mistakes, but making smarter and more determined progress than ever. What lessons have we learned so far?
1. Excessive trust leads to poor financial decisions
The difference that a few weeks can make is surprising. Not long ago, the market reached new heights when unemployment peaked. Everything seemed to be fine. And many made financial decisions as if nothing could change: they spent more, accumulated debt, made riskier investments, and saved less. But everything changed, revealing the fragile financial house they had built. Excessive trust leads to poor financial decisions and is overly aggressive in some areas while ignoring others. We have to be smarter.
2. Everyone needs an emergency fund
Financial experts have long emphasized the importance of emergency funds. Why? Because a financial emergency is not about whether it happens, but when it will happen. An adequate emergency fund can help you overcome times when income is low or absent. Those who had reserved money for an emergency are better able to cope with the current storm. How much should you save? I recommend living for three to six months, depending on how many people depend on your income. A financial emergency will arise and we must be prepared.
3. Developing multiple income streams is more important than we think
In my book Find more money I explain to readers how you can get a part-time job and earn income outside of your full-time job. There are many reasons why people are looking for more sources of income: paying off debt, saving for the future, or even giving away more. The crisis has taught us that multiple sources of income can not only help us achieve our financial goals when the times are good, but also help us overcome the times when the economy is going down and layoffs are common. . Additional sources of income provide an opportunity to generate some income even if you lose a job. In the future it will be worthwhile to develop another stream of income.
4. Suck debt
For many of us, credit card and auto credit balances reflect a lifestyle that we can’t really afford. We try to show what we don’t have, but statistically we probably can’t even afford this lifestyle. So we build a facade out of lies. And what do we find in the end? A massive debt burden. And even though you hate this burden, you still have to pay your bills. In difficult financial times, the burden feels even heavier. We have less money to pay the bills, and the accumulation of surcharges and interest makes the debt even higher. Debt really sucks.
5. Saving for retirement is not for the faint of heart
I mentioned the danger of overconsciousness earlier. During the bull markets, excessive trust leads to poor financial decisions. It is fear that moves the pieces during bear markets. When the market falls, challenge your emotions to abandon your investment strategy and sell everything. But that’s a big mistake. We know what leads to a successful retirement investment: discipline and long-term thinking. We have to let our brains control our emotions.
6. Financial margin is key
It is worth looking for emergency funds, living free of debt and saving for retirement. To pursue these things, however, we need a financial margin. Life from a fortnight to a fortnight will not get us there. We have to learn to maintain our existing standard of living while increasing our income. We cannot allow the number on our payment to determine the amount we spend.
7. Generosity changes lives
Where there is great darkness, the light shines even brighter. We have seen the impact even small, seemingly generous actions can have on our neighbors and the community. What we do with the resources at our disposal is important for others and for us. Although we often regret past purchases, we rarely regret past generosity. It has to be a financial priority for everything.
We got knocked down and it hurts, but we’re crying on the floor. We need to get up and prepare to fight another day that is equipped with the lessons we have learned.