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This year has been challenging for many of us in more ways than one, but there are some valuable financial lessons to be learned from the last six months.

Create a Financial Safety Net

One of the best things you can do for your financial wellbeing is to have a solid emergency fund. Most experts say to save three to six months’ worth of living expenses in case of emergency. I’ve never been a fan of rules of thumb and this is no exception. We are more than six months into this thing and there are still 30+ million people collecting unemployment benefits. If you are someone who has had a disruption to your income this year, you should consider saving beyond that six-month benchmark. While you won’t make stock market like returns on your money in a savings account, you won’t have to worry about selling out of stocks in the event of a true emergency.

Practice Mindful Spending

If the pandemic has taught us anything it’s that we can go prolonged periods of time without re-stocking up on certain foods and household items simply because we do not have access to them. I went a full three months this year with no paper towels because my local Kroger couldn’t keep them on the shelves long enough for me to buy them. Instead of reaching for a paper towel every time I had a mess I reached for a washcloth, I had to adapt, and it wasn’t terrible. Did I save loads of money by not buying paper towels? No, not really, but it made me think about all the other things I could go without if I really needed to.

The next time you find yourself thinking you need to make a purchase, take a moment to pause and think about how your purchase might improve your quality of life. Will you be able to enjoy whatever you are buying for years to come or will the excitement fade shortly after swiping your credit card? Can you afford it? What will you be giving up by making the purchase? Asking yourself these questions might not change your mind about spending the money but getting in this habit of practicing mindful spending can have a tremendous impact on your financial wellbeing over time.

Re-Check Your Risk Tolerance

We’d all prefer to take less risk for more reward. Who wouldn’t want the safety of Treasuries with Tesla-like returns? But in markets you have to forgo some of that potential upside for downside protection, there’s no other way around it. Take a good look at how your portfolio is allocated. How did you feel on March 23rd when the market bottomed out? How do you feel now that we’ve seen a recovery? Did you change anything, or did you stick with it? What’s your time horizon? Making drastic changes to your portfolio based on your short-term feelings is never a good strategy but taking a step back and asking yourself these questions can help you determine whether or not you can handle the current level of risk in your portfolio going forward.

Protect Yourself and Your Loved Ones

For someone who is in generally good health and is relatively young, this pandemic has made me think about my own mortality more than once. What would happen to my family if I was sick and unable to work? Would my husband be financially sound if I passed away? If I’m gone what kind of debts would he need to pay off to live comfortably on one income?

Having estate planning documents in place is crucial, as these documents not only determine what happens to your assets after you’ve passed but also determine who will make decisions for you in the event you are unable to do so yourself.

Another area you may want to re-visit is your need for disability insurance and life insurance.

While disability insurance won’t cover unemployment the nature of disability insurance is to cover you when you are sick and unable to work. It’s important to make sure you understand how long your elimination period is and if you have any additional riders like waiver of premium.

Finally, life insurance. If you’ve had a major life event since the last time you applied for coverage it might be a good time to re-evaluate your needs. You may also want to consider how much of your coverage is with your employer. While group policies can often be less expensive than individual policies, benefits can also end once your employment does. If you are fortunate enough to have the option to convert your policy after leaving or losing a job, it can be very costly.

Bottom Line

When everything is going right financial planning can seem mundane. No one wants to dial back their risk when the market is up, just like no one wants to think about dying when they’re young and healthy. Unexpected events are a part of life, and while I hope we never experience another global pandemic again during our lifetimes, I hope that we can all take a little something away from this year’s events and turn it into something positive, like being more financially prepared.