Money lessons to take into the ‘new normal’
With recent events bringing a wave of changes to Kiwis’ lives, the pandemic has certainly been a key time for personal finance lessons – which will be worth keeping in mind in the years to come.
Here are six key money lessons that we can take with us into the future.
Setting aside your ‘rainy day’ fund
We’re always told to have an emergency fund – anything from a couple of months’ worth of income to a year’s worth of expenses, squirrelled away in a bank account before we start investing in anything else. And recent times have shown us how important that ‘safety net’ can be – for the crises you can’t see coming as well as the ones you can.
The good news is, we can survive with fewer indulgences than we think.
After the initial surge of panic buying, lockdowns have proven to many of us that we can make it through at least four weeks with nothing more than spending on the essentials.
While this doesn’t mean it should become our ‘new normal’ (we all know life’s better with a few indulgences here and there), it may be something to keep in mind the next time you look at your budget.
Always understand the risks you’re taking
The share market has been volatile throughout 2020. But after the initial downturn, it has also rebounded fairly well. This has been a timely reminder that investment returns go up and down in the short-term, so it’s important to keep your gaze on your long-term goals.
For many New Zealanders – whether property investors, KiwiSaver members or the increasing number who’ve been dabbling in direct share investment in recent years – it may have been a learning curve when it comes to understanding their ‘risk appetite’ (how much risk they are willing and able to absorb, depending on their situation).
Risk is part of the investment journey, but it’s important to understand the risk you’re taking, and know you can handle it emotionally, as well as financially.
Diversify your investments
Covid-19 has hit some parts of New Zealand much more than others. And for investors, it can be a lesson in diversification. If you have invested in a wide range of sectors and industries, as well as different asset classes, you’re likely to have felt less pain than someone who put all their money into Air New Zealand shares or buying apartments to use an Airbnb, for example.
Asking for help when you need it
The idea of taking money from the Government was totally foreign to many New Zealanders until last year, when many businesses claimed the wage subsidy to help lessen the Covid-19 blow, and we may see the same happening in 2021. For many, it was a good reminder that you can never know the circumstances that might lead you, or someone you know, to needing some help. And when you need it, there are always some options out there – just remember to ask.
Like to make a difference? Shop local
It can be easy to fall into the habit of stocking up with Asos or Amazon. But the Covid-19 outbreak has reminded many of us that New Zealand is a nation of small businesses, which rely on us to keep going. According to Colmar Brunton’s research from 2020, an increasing number of New Zealanders pledged to do their post-lockdown spending with shops and restaurants that were local to them. If that’s a lesson that sticks, it can go a long way to help our economic recovery.
Like to talk?
Whether you have a financial decision in the works, or would like some certainty over whether you’re on the right track, please get in touch with us. We are available for all your questions, anytime.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.