my two cents

Money Lessons From a Truly Terrible Year

Photo: Harold M. Lambert/Getty Images

What are we supposed to learn from this hellish year financially? It beats me, to be honest. To suggest that there are money lessons from 2020 implies that its events were logical or within our control, disasters we could have budgeted for. Personally, I want to throttle anyone who says the pandemic should teach people to save more in case of emergencies. Of course, it’s always helpful to have savings! But that’s maddening advice for the millions of people who didn’t and won’t be able to for a long time — and for the plenty of people who did and still ran out of money anyway.

One thing is for sure: This past year changed everyone’s outlook on their finances and their security in general. And that must have taught us something. To get a better sense of what we may glean from it, I spoke to several financial experts about what they learned in 2020 — for better or worse — and what they hope to carry forward in the future. Here’s the advice they gave.

1. Understand where your money is.

“I discovered this year that many people don’t know their numbers,” says Tiffany Aliche, author of The One Week Budget. “A lot of my friends weren’t sure whether they had private or government student loans or what the interest rate was. They didn’t know how much money was on their credit card or what that interest rate was, either. When everything is fine, that may not seem like a big deal, but when you lose your job, those details really matter.”

For me, doing a detailed inventory of my money (and my debt) was a huge part of keeping my sanity this year, especially during scary patches. Right before the pandemic hit, I paid a small fortune in vet bills trying (unsuccessfully) to keep my beloved cat alive. As a result, I decimated my savings just in time for the economy to implode. That same month, I lost a work contract that had supplied a reliable stream of income. Then the world locked down for the foreseeable future, and I was ready to panic. So I did what I normally do to calm myself down: I drank too much wine and then (the next morning) wrote everything down. I made a spreadsheet of my expected income, my bills, and what I could pay when. Doing the math helped me realize I wasn’t quite as broke as I felt as long as I kept track of everything and stuck to the plan.

2. Figure out where to get help.

Anyone who says they got through this year under their own steam is probably lying or in denial. We all had to lean on someone — a family member who provided free child care, a landlord who offered a break on rent, a friend who gave useful financial advice. Asking for help is a humbling experience, but it also forces us to kick the tires on our support networks.

For author and financial educator Eugenié George, seeking support meant finding financial mentors. This past year, some of George’s older family members experienced health problems, and it dawned on her that she will be responsible for caring for them as they age. “At first, I was freaking out,” she says. But then she realized she could seek guidance — particularly from other personal-finance bloggers in similar situations. “Finding financial mentors has really helped my anxiety,” she says. (Her top picks are Demelza Campbell, who writes Parental Wealth, and Cameron Huddleston, the author of Mom and Dad, We Need to Talk.)

3. Learn how to sit with a tough situation.

One of the worst parts of this year was how little we could do about the shitty things that happened, besides the obvious (stay home, vote, donate money, wear masks, repeat). I struggled with this a lot — was I being appropriately patient or too passive? Would doing “more” change anything? Financial therapist Amanda Clayman also experienced this conundrum when she and her partner each received unexpected pay cuts and had to figure out what to do. “Our situation demands that we sit in this in-between space of knowing that we aren’t where we want to be, which is a tough thing when we are emotionally taxed and feeling overwhelmed,” she says.

Instead of hitting your head against a wall or despairing that things will never get better, Clayman recommends focusing on what you need in the moment. “It’s important to have a picture of what you want long term but also to have perspective,” she says. “In our case, the opportunities to get what we want are not here right now. So in the meantime, we have to wait and take care of ourselves so we’ll be ready when the time comes.”

4. Know your bare-bones expenses.

Aliche calls this your “noodle budget”: How much does it cost to support yourself if you get rid of all the extras? “I know what that number is for myself and how to reach it — it’s cutting out travel, eating out, streaming services, any frills,” she says. “Normally, my life costs $6,000 a month, but if I had to trim everything, I know I could get it down to $4,000.”

This is a good time to figure out that amount — after all, you probably aren’t going out to dinner much or taking fancy vacations. It’s also helpful when you’re planning for the worst. “If you’re worried about your job, you could drop down to your noodle budget for a little while to conserve your funds,” says Aliche. “Hopefully, you never actually need to live there, but knowing you can should give you peace of mind.”

5. Reevaluate your spending priorities.

“Before the pandemic, I had certain spending habits that I didn’t even think about,” says Farnoosh Torabi, a financial journalist and host of the podcast So Money. “What I thought of as self-care routines, like going to the nail salon or getting my hair done, were actually just a way for me to take time for myself. And when I was forced to stop because of the pandemic, I was like, Wait, I didn’t need to spend money to do that.

When the world does eventually reopen, Torabi plans to be more careful about what she adds back into her life. For instance, she really does miss workout classes — the online videos just aren’t the same — and travel. But she doesn’t need to get her hair professionally dyed three times a year. “Once people have more options to spend money again, I hope they don’t just jump back into what they were doing before,” she says. “For me, I know that some of the changes I’ve made this past year will be permanent.”

6. Be gentle with yourself.

Aren’t you tired? I know I am. It’s been impossible to make plans for anything this year, and the first few months of 2021 won’t be much better. So cut yourself some slack and remember that it’s healthy to occasionally blow money on dumb, frivolous stuff these days, too. “We don’t know when COVID-19 will be over, and we can’t stop living until it is,” says Megan McCoy, a professor of personal financial planning at Kansas State University. “Maximizing pleasure today while finding ways to be smart about the future should be our mindset.”

Money Lessons From a Truly Terrible Year