What the Coronavirus Has Taught Us About Financial Planning

Let this health crisis serve as a lesson -- a difficult but important one. 

As COVID-19, more commonly known as the coronavirus, continues to be a worldwide threat, Americans are hunkering down at home. The hope is to halt its spread, or at least flatten the curve, as the experts put it, so as to not overwhelm U.S. healthcare systems in the coming weeks. 

But COVID-19 is taking more than just a logistical toll on the country; it's taking a financial toll as well. Countless Americans are currently without a paycheck because they can't go to work, whether that's because their offices are closed or because their kids' schools are suspended and they're stuck at home with no childcare. And to be clear, health officials have made it obvious that home is the best place to be right now, even if that means having to go without pay for a period of time. 

But not everyone is financially equipped to miss a single paycheck, let alone several months' worth of income. As such, a lot of people are already in the process of learning some very hard financial lessons. Even if you're in the fortunate position of being able to work from home, and thus retain your income as the country locks down, let this crisis serve as a lesson to always be financially prepared. 

Our big COVID-19 takeaway: Have emergency savings

We're told to have money tucked away in a savings account at all times -- specifically, enough to cover three to six months of living expenses. That's not a random range -- it's designed to allow you to not only cover unplanned bills like home or auto repairs, but also to get you through a period of unemployment. In fact, in 2019, the average American who became unemployed stayed that way for 21.6 weeks. As such, having a healthy emergency fund is crucial, as those who are now losing their income due to COVID-19 are, unfortunately, finding out the hard way. 

Of course, it's difficult to build emergency savings while you're already deep in the throes of a crisis. If you've just been laid off, you're clearly not in a position to start building cash reserves (though what you should do is file for unemployment benefits through the state you worked in, and see about getting temporary relief from paying your bills). On the other hand, if you're still collecting your regular paycheck, take this time as an opportunity to pad your savings in the coming weeks. 

We don't know if COVID-19 will spur a full-fledged recession, but even if it doesn't, it's clear that its economic impact won't be short-lived. And the best way to protect yourself from the many unknowns that lie ahead is to have a fully loaded emergency fund. 

A second COVID-19 takeaway: Don't fall back on your investments

Some people don't store a lot of money in savings because they have stock investments and figure they can cash them out in a financial pinch. But the stock market has taken such a beating in the past few weeks that anyone who attempts to liquidate investments for cash right now risks facing massive losses. 

The point? Investments can't take the place of emergency savings. If you're out of work right now and don't have money in the bank to tide yourself over, you may simply have no choice but to cash out some stocks while they're down. But that could be a harsh long-term blow to your finances. Once this crisis is over, keep one crucial rule in mind: Never lock away money in stocks that you may conceivably need to use within 10 years. Rather, build up your savings so you have the flexibility to leave your investments alone while they're down and let them recover. 

The COVID-19 crisis has caught millions of people by surprise, and it's too soon to tell when things will start to normalize. If you weren't financially prepared for a situation like this beforehand, pledge to at least learn from this almost unfathomable experience. With any luck, you'll recover as quickly as possible and set yourself up to be more financially secure for the long haul.