The recession caused by the COVID-19 health crisis taught us that proactive measures are the best financial plan.

Historically, every 8 to 10 years, the economy experiences a recessionary environment. For many investors, 2020 was the first recession they have experienced. Nobody loves a recession, but there is a silver lining; they provide a unique opportunity to pay closer attention to your personal finances, learn from experience and create a proactive financial plan for the future.

At Emerj360, we always say “control what you can control.” Aspects of your personal finances that are within the realm of your control are your budget, emergency funds and asset allocation. Financial lessons emerged in each of these areas during the pandemic.

Lesson 1: Build an Emergency Fund

The pandemic taught us to expect the unexpected. Emergency funds were top of mind for most people during the pandemic, due to the fact that several jobs were lost or furloughed. Having a savings cushion allowed people to pivot comfortably when the pandemic became an income-affecting emergency. It may seem like Personal Finance 101, but emergency funds are a necessity, and many people didn’t have one. Depending on each individual situation, it is crucial to have three to six months of expenses saved for the unexpected in a checking, savings, or money market account.

Lesson 2: Use a Budget

During the lockdown, discretionary spending plummeted, which helped people to more clearly define the difference between a want and a need. Everybody knows that keeping a budget to monitor spending is important. However, like we saw with emergency funds, many people didn’t actually have one. Our clients wanted advice on cash flow management, and how to decide if they should save surplus funds or use them to aggressively pay down debt. Using a budget to manage income and expenses is the most effective way to make your finances work for your needs, because it puts you in total control of Financial Lessons your cash flow.

Lesson 3: Stay the Course

Investors learned they need to keep a long-term mindset and the importance of maintaining focus during market volatility. The market naturally experiences periods of recessions and pull-backs. Sometimes, individuals get emotional and want to pull money out because they worry they’re going to lose everything.

Stocks generally go up over a long period of time. A younger investor can tolerate more risk in the market because they have a longer investment horizon. Younger investors should never make the decision to pull money out, especially when they are contributing to their employer-sponsored 401(k). As a person gets closer to retirement, their asset allocation should shift towards a more conservative approach, as the investment time horizon gets shorter. Working with a financial professional can assist in these types of changes the closer you get to retirement

Overall: Positive Outlook

Being systematic and process-oriented by building an emergency fund, following a budget, and staying the course will help you live comfortably when the next recession happens. We see time and time again clients who budget, save, and invest throughout market volatility and recessionary periods come out better than ever.

Schedule a consultation with the Emerj360 team if you’re ready to be proactive for the future and create a financial plan.

Written By  Heather Jordan
How to Create a Budget for Your Financial Plan
Brett Sebion, Financial Coach  – November 21, 2023
When it comes to following your financial plan, your budget serves as a roadmap for your spending each month. Building a budget that is organized, comprehensive and easy to follow is an important step to growing your wealth and savings. And while following a budget may seem like a tedious task, it is actually simpler […]
Keep Reading
Five Tips to Save for Multiple Financial Goals at Once
Heather Jordan  – November 14, 2023
Most of us will always have savings goals that compete for priority in our lives. Between home ownership, retirement, student loans, new vehicles — it’s easy to get overwhelmed and not understand how to realistically tackle these goals at the same time. The best way, of course, is to have a savings plan. By taking […]
Keep Reading
Protect Your Finances From Fraud
Heather Jordan  – November 13, 2023
As you navigate the digital landscape, it is important to be aware of the evolving fraud risks. Scammers embrace AI and other technology because it enables them to analyze large amounts of data quickly, identify potential targets more efficiently, and personalize their scams to appear genuine, increasing the chances of success. By equipping yourself with […]
Keep Reading

What are you waiting for?

Everything we do boils down to this: by doing what is best for you, we do what’s best for our company. Helping you build financial security and plan for retirement so you can look forward enjoying life.
Open Account right-arrow-dark Sign Up Now right-arrow-dark