7 Personal Finance Lessons from the Coronavirus

7 Personal Finance Lessons from the Coronavirus

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The Coronavirus (Covid-19) outbreak took a concept many investors love, compound growth, and turned it against us. What started as a distant problem overseas is now scaring nearly every person in the United States. Personal finance lessons aren’t the only things we’re learning from this humbling virus…


Primarily, the impact it is having on the health of ourselves, loved ones, and neighbors.


Though the pandemic is also making an impact in many other ways, including on everyone’s social life, ability to move around, and of course, the economy.


Local businesses are struggling, the S&P 500 is extremely volatile, and everyone’s personal financial situation is changing day by day.


Given all the uncertainty, I thought it would be helpful to share seven things that are for certain. That is seven known personal finance lessons from the Coronavirus that we can learn from and act upon.


7 Personal Finance Lessons from the 2020 Coronavirus (Covid-19)


1- You Need an Emergency Fund


An emergency fund is exactly what it sounds like – cash that is set aside for emergencies.


Vanguard has one of the best and simplest definitions I’ve seen, “An emergency fund is a stash of money set aside to cover the financial surprises life throws your way.”


These financial surprises could be any number of things, including:


  • A large medical bill
  • An unexpected job loss
  • Or, more applicable, a pandemic that cripples the global economy


Your emergency fund is the first place you can pull money from when needed, which saves the need to dip into your investment accounts. This is especially powerful when the market is down double digits like it is now.


This is best viewed in a simple example.


Let’s say two people had $1,000 as of January 2020. Person A put $200 into an emergency fund and the remaining $800 into a S&P 500 index fund. Person B put all $1,000 into a S&P 500 index fund.


Then, both people are faced with a $200 emergency 2 months later, after the market has dropped by 30% (and taken 30% of your portfolio with it). Personal A can use their emergency fund, keeping the original $800 (now $560) in the S&P 500. Person B must take from their index fund, leaving them with only $500 after it’s all said and done.



  • Person A: $560
  • Person B: $500


The emergency fund acted as a useful buffer for Person A, and that will only be more apparent as the market begins to rebound. This benefit will also be amplified as the investments grow larger and the emergencies increase in impact. 


Most experts recommend having 3-6 months of expenses saved up in an emergency fund, if not more. Though, your risk tolerance will help inform how much is right for you, and keep in mind, some people do actively decide to not have any emergency fund.


2- The Importance of Liquid Net Worth


Liquid net worth is defined as the amount of net worth you could convert to cash today if needed.


In calculation form, it would look like:


Liquid net worth = liquid assets – liabilities


Liquid net worth becomes more important in a time of crisis because it measures how well prepared you are to handle one. Essentially, it takes your emergency fund one step further.


Someone with liquid assets, like a brokerage account, will be better prepared to handle a crisis after their emergency fund is depleted.


You should not try to increase your liquid net worth at the expense of saving for the future, but it is an important metric to understand nonetheless.


3- Timing the Market is Impossible


Are you ready to take a look at the S&P 500 returns for the week of March 16?


Let me warn you, it’s quite the rollercoaster:


  • Monday: -11.98%
  • Tuesday: +6.00%
  • Wednesday: -5.18%
  • Thursday: +0.47%
  • Friday: -4.34%


Just as I expected it would come in…


…kidding! Of Course.


No one knew this would happen, and no one knows what’s going to happen tomorrow!


The market could rebound with promising news of the virus being stemmed, or it could continue to tank as cases spread throughout the US.


The bottom line is, no one knows what will happen in the market tomorrow, let alone a week or month for now. This is why having a long-term plan is so important.


4- Having a Long-Term Investing Plan is Necessary


Having a long-term plan for investing is necessary whether there is a crisis or not. In fact, building a long-term plan before a crisis is usually better – it helps prevent you from getting distracted by short term noise.


For example, if your plan is to hold 90% in equities and 10% in bonds for the next 10 years, should you shift to 100% equities to “take advantage” of the current market downturn?


No, probably not.


You should stick with your long-term plan, reallocating your portfolio to match your plan and continue to invest as you can.


A crisis also makes it clear that a simple plan is often the best choice.


There is no need to overcomplicate things, and that becomes clear when the world seems to be caving in from every direction. It’s why I think that building a simple, 3 fund portfolio is one of the best investment strategies to choose from.


5- Understanding Your Budget Inside and Out Can Help


Not everyone will, or even should, have a budget.


However, in a crisis, when cash is short and saving money is critical, knowing your financial situation inside and out can help. That’s where a budget comes in.


If you find yourself needing to save a few extra dollars to get by, building a budget can help show you exactly where your money is going, which will likely lead you to some obvious places to save and cut back as needed.


6- Buy Things You Value


Perhaps one good thing about cutting back on expenses, as many of us are doing right now, is that it will show you what you truly value and what you don’t.


Maybe, to save some money, you stop online shopping for a few months. And just maybe, you realize that the things you were buying online are things you could live without.


On the other hand, giving up a weekly latte from your local coffee shop might be out of the question (even during a crisis). Some people just love their gourmet coffee.


Disclaimer: please don’t @ me for the online shopping example! It was just one example, and if you love buying things online, please continue to do so as long as it fits your budget. 


7- Help Where You Can


Last, and certainly not least, the Coronavirus is hitting some people’s wallet much harder than others.


Many restaurants are closed except for carry-out, gyms have shut down, movie theaters aren’t open, and even your local dentist office can no longer operate and generate any income.


If you can afford it, consider continuing to buy takeout, making a donation to a local business that you love (I know a ton by me are asking for help), or schedule your regular dental cleaning for a few weeks down the road – then follow through.


Summary: Lessons from the 2020 Coronavirus (Covid-19)


The Coronavirus is giving most of us a lot of time to sit at home and reflect.


And believe me, I’ve been watching my fair share of The Office, but I’ve also been using the time to learn from the points above and make sure I come out of this pandemic as financially healthy as possible.


I hope you can do the same!




Kevin runs the personal finance website Just Start Investing, where he focuses on making investing easy. Just Start Investing has been featured on Business Insider, Forbes, and US News & World Report, among other major publications for his easy-to-follow writing. Check out Just Start Investing to learn the simple strategies to start investing today, as well as ways to optimize your credit cards, banking, and budget.



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  1. Great advice Mike. I actually thought of you and your dental practice during this crisis as my local dentists were forced to shut down.

    Scary times. Especially for anyone who is just starting out a practice and burden with a ton of student loans this could be a death blow.

    1. It’s so great to hear from you, as always, X-Ray! I hope that you’re staying healthy and well out there on the front lines! Thanks for thinking of us – we’re working to navigate this new and unprecedented time and I’ll 100% have some business content to share with you all sometime soon. Great to hear from you, Dr! Stay safe and talk soon!

  2. Hello. Thank you for the great example in #1. I’m not following the math however. How does person B have $500 and not $360 left in their funds?

    1. Hey – the math works like this for Person B. They start with $1,000. The market declines by 30% so they now have $700. Then, they spend $200 of their remaining $700 on the emergency, they are now left with $500.

  3. I love budgets! You can learn so much from that small chunk of data. For example, what to cut when times are tough.

    I am grateful to still be employed, so I have been sending gift cards to friends and family who arent so lucky. We are only going to get through if we stick together – 6 feet apart! Happy health and saving!

    1. Exactly! That’s the main reason I think budgets can be helpful.

      And that’s awesome… I’m glad you’re able to help your friends and family out!

  4. These are actually painful lessons that covid19 is trying to teach us about money.
    By the time we get past all of this, I don’t think there will be anyone that will live without an emergency fund.

    1. It is really a crazy time, these days – no doubt. But I couldn’t agree with you more – through trials and difficulty come the greatest learning experiences. Now it’s just up to us to hold up the learning end of the bargain. Thank you for stopping by!

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