Learning 10 Money Lessons the Hard Way

If there’s anyone who can tell us where to find the light when it comes to the pandemic and our money, it’s Cleo favourite and saving expert, The Penny Pal. Here’s a wrap up of this year’s learnings so far and how we take them and move forward.

As lockdown eases off, it’s high time we take a moment to take note on how the pandemic has affected our cash. We weren’t able to prepare for the financial implications of COVID, but we can certainly prepare for it’s easing - as the financial implications will probably be lingering for longer than the actual virus! Let’s take a look at some of the harder money lessons we learned this year:

#1 Emergency funds are a must. An actual one.

Here comes the old emergency fund cliche but damn, time for another cliche – it’s a cliche for a reason. Saying Coronavirus caused a financial emergency for people is an understatement. If this year’s Coronavirus pandemic has taught us anything it’s that:

• Having an emergency fund is mandatory
• An emergency fund needs to be more than $1000
• If we had a dollar for every time I had heard the term “emergency fund” we wouldn’t need one

Yes, we hear your cries as you read yet another article telling you that you need an emergency fund - sorry, but it’s time to suck it up. Same old story, totally different day. As is seemingly everyday this year. Shocking.

You might be sick of hearing about emergency funds, but taking the repetitive advice to heart and having one is something that you’ll never regret. With 28% of US adults not having any savings at all and 36% of Americans having no savings for retirement, the message is needed.

Our generation is probably never going to see a health pandemic like this again (we sincerely hope), but there is no doubt we will experience emergencies that are equally as financially draining. Like when your car breaks down unexpectedly or you get an unexpected medical bill. These situations aren’t pandemic specific and having an emergency fund will ensure that they’re not as much as a burden to future you. Now, we are aware that saving for an emergency fund during a global pandemic might be like trying to fill up a bucket with water whilst there’s a hole in the bottom of it but, what you should be aiming to do is build a habit - once you have built the habit of savings, the world is your oyster (or at least it will be, someday). Start small. Like tiny small if you need, and you’ll finish big.

#2 What’s all this buy now, pay later business? A hard no is what it is

Hand up if you have ever been personally victimised by ‘buy now pay later’ schemes? Yep. We get it, who wouldn’t want to have a little splurge and not see the money taken out of their account immediately – you’re human. It’s risky territory though, and as the pandemic shifts we are seeing online sales surge and BNPL businesses are reporting a 200%+ increase in customers in the third quarter with 1.1 million of those users coming from the US alone.

This payment method has proved extremely popular with millenials with the main reason for BNPL usage gearing towards the idea of not wanting to accumulate debt, wanting more control over spending and wanting to avoid interest charges - which sounds great until you read stats stating that 43% of millennials who used BNPL schemes in the last year missed at least one payment. Our stance on this? Educate yourself fully before using any financial product, there’s no piece of clothing or accessory that is worth your credit score. Don’t steal from your future self, unless it’s absolutely necessary.

Possibly the worst part about Buy Now Pay Later is that these payment methods are absolutely everywhere now. Just about every eCommerce site gives you the option to make 4 smaller payments of however much instead of just buying the product outright. It’s easy to give into the temptation but it’s easier to remember this one simple fact when weighing the decision:

If I can’t afford to buy this item outright, I can’t really afford it at all.

If you’re looking at a jacket that costs $100 and you can’t afford it, but you CAN afford $25 right now...well you can’t really afford the cost of that jacket. Best to just put some savings aside gradually and just save up instead. This way you don’t owe anyone. Debt is one of the hardest money lessons to learn, so why not avoid it altogether.

#3 2020, the year the passport became redundant

That backpacking trip to Europe? We were so close, but it wasn’t meant to be this year.

Now, I am not sure if we should mention travel or is that still a touchy subject for everyone? Let’s go with it, tough love. So, it’s January 2020 and you’ve just confirmed a holiday destination with your group of friends. The group chat is going off with excitement as the group admin (there’s always one) books the flights and accommodation. You’re eagerly awaiting the screenshot stating “flights confirmed” but wait, the group admin asks if you want to add travel insurance for $14.99 onto your booking.

Although you’ve literally just spent nearly $200 on flights and $400 on accommodation, $14.99 to protect your purchase just seems like a bit of a stretch. Weeks later you start hearing about some kind of virus going around. Oh, probably won’t be a big deal right….right? We won’t finish the story because you know how it ends and spoiler alert, it ended up being a big deal.

Travel insurance isn’t the most exciting purchase but boy did COVID teach us the importance of it and as I’m sure a lot of you have experienced. Not all airlines, resorts, cruise lines and travel agents are thrilled about providing refunds and with companies like American Airlines losing $70M a day it’s not surprising. Going forward, consider investing in that travel insurance - you really do never know. These kinds of money lessons definitely hurt pretty bad, but making sure you’re covered from here on out will be worth the initial tough luck.

#4 The gyms are closed and we feel fitter… what?

It has come to light during COVID that gyms are not the only way to keep fit. Anyone who has been within arms length of an Instagram live will now know that there are so many resources online that allow you to keep fit without the hefty price tag of a gym membership.

With gyms like 24 fitness losing roughly 1 million in revenue it was vital for gyms to adopt the “pivot don't pause” method and turn their attention to social media and webinar platforms like Zoom. Beachbody did just that and experienced a 200% growth in subscribers.

Who are you more impressed with? Beachbody for their pretty sickeningly incredible growth, or Zoom who have managed to sit silently in the background of the pandemic and cash in on the new way of working?

Remember, one of the best money lessons you can learn is how to cut out the fat when it comes to expenses. You know what’s a perfectly viable way to stay fit? Bodyweight exercises and cardio outside. Go for a run or a hike. Do some yoga or some plyometrics. If you’re more hardcore, maybe it’s time to invest in some home gym equipment! Surely, some adjustable dumbbells will more than pay themselves off when you don’t have to drive back and forth to your $100 a month premium gym. Definitely something to consider!

#5 Budgets need to be flexible

Alright, we’re gonna need another show of hands here. Who predicted we’d have a pandemic the likes of which hasn’t been seen in 100 years? Who predicted said pandemic would put people in hospitals and put tons of folks in seriously dire financial straits. If you’re raising your hand right now, WHY DIDN’T YOU WARN US?!?! If you’re not raising your hand, join the club. It’s possible this crisis left you unemployed, unable to pay rent, forced you to shut down a business, or any number of other terrible things. It’s safe to say, all budgets were probably destroyed, no matter how carefully you constructed them.

We mentioned earlier the importance of an emergency fund, but budgets clearly need to be flexible too. A basic budget is great when nothing goes wrong, but as we learned, things can go very wrong very fast. With a dynamic, flexible budget you can be a little more prepared for the unknown. A budget where you can cut down some expenses at a moment's notice and adjust. A budget that has some savings stowed away for just such occasions. Luckily, with apps like Cleo, setting up a budget like this is easier than ever, but it’s still important to keep this in mind for next time something (hopefully not something like this) happens.

#6 Side hustles are your main win

Everyone is always looking for the next great side hustle. It’s an unfortunate truth that sometimes your 9-5 job just isn’t quite enough to pay the bills. Or maybe you just want something on the side to have a little extra spending money. Well if you had some side hustles set up going into the pandemic, it’s likely you were pretty grateful. Some of these ended up being a lifeline for individuals who lost their main job. When you have various streams of revenue, it hurts a little bit less when you lose one of them unexpectedly. Obviously, not everyone has the time for side hustles, but if you do they can definitely be a big help and lessen your financial stressors.

#7 Investing is a trip

If you’re investing in stocks, cryptocurrency, gold, or whatever else, the pandemic might have been a very exciting or depressing time for you. The truth is though, markets are constantly fluctuating. Sometimes it can be helpful to zoom out and look at the bigger picture. Sure, maybe you lost $100 or even $1000 on your investments in one day, but if you look at your portfolio over the past 2, 3, or 4 years, the situation seems less extreme. Investors would do well to pump the brakes every once in a while, take a breath, and look at the long-term implications of their investments rather than the day-to-day.

#8 Millenials are moving home and it’s kinda nice

Obviously this doesn’t just apply to millennials, but more people than ever are moving back home with their parents and family members. And if you have parents that are ok with this, why not? Until you can get your finances back together, not having huge bills like rent and utilities can be a big help. Of course, this might not be possible for everyone, but there are other solutions too. You can seek out roommates and live in cheaper accommodations too. Maybe you haven’t lived with a roommate in years, but hey, desperate times right?

In short, people are having to do things they thought they wouldn’t have to do again. Aren’t at the job you thought you would be at this point in life? That’s ok, you’ll get there. Having to move back in with the parents even though you left the coop years ago? No shame here, in fact, it’ll be nice to get some quality time with the family you might not have gotten otherwise. Whatever financial choices you’ve had to make in these unprecedented times, you shouldn’t feel bad about them. Everyone needs to make their way somehow.

#9 Not all advice is good

Look we know this is a bit contradictory because we’re throwing out advice rapidfire here, but the simple fact is you can’t take every single money lesson on the Internet to heart. You could spend hours reading hundreds of blogs teaching different money lessons, but sometimes the best lessons are learned through life experience. Also, sometimes good advice on the Internet might not be good advice for you. People have different money situations, are at different stages in life, and not all advice will apply universally. A college student is going to need vastly different money advice than someone who is retiring. So if you’re feeling burned out trying to figure out how to handle your money, make sure to take a deep breath, step away from the computer for a moment, and realize that you’ll figure out what’s right. You got this.

#10 Picnics are bigger than they were in the 90s

Speaking of stepping away from the computer, has anyone else interacted with their friends more during lockdown than they did prior? And ended up spending less? Yes, probably. We don’t have to spend a load of cash to enjoy each other's company. Huge news.

Perhaps this is the most valuable lesson of them all – to value time currency the same as we value monetary currency. And to spend it wisely. Granted, the pandemic has taught us that money is very important since so many people were affected negatively financially, but it’s also good to keep in mind that constantly dwelling on finances isn’t healthy for us mentally.

On that note, if you struggled with your finances during the pandemic or learnt a lesson or two then don’t be too hard on yourself. As you’ve probably heard many times before - we are literally in the middle of a pandemic! A pandemic that is by no means your fault. A bonus lesson to learn from all this is that it’s time to be kinder and gentler to ourselves and our fellow humans.

Let Cleo Help You Out

If you need a little extra help managing your financial situation, then maybe it’s time you met Cleo. Cleo is the best, funniest, most helpful money saving and budgeting app around. With Cleo, you’ll know exactly how much you can spend each week, whether or not you have enough for bills, how to save for that next big purchase, and so much more. Cleo is even equipped with a feature specific to the pandemic, designed to help you get through these strange and uncertain times. Oh yeah, and did we mention Cleo actually talks to you like a human being? Offering sick burns and uplifting comments whenever you need them. Yeah, it’s a pretty cool app. Download Cleo today and see what all the fuss is about.

The Penny Pal has given a LOAD of top money lessons here – we’d love to hear all about what you’ve learned too! Tweet us your big money lessons at @meet_cleo.