What we can learn about money from the covid era

As the country slowly emerges from the latest lockdown, the one wish we all have is that this was the last one. Fingers crossed it will be, as the vaccination programme is progressing well, the weather is more conducive to life outdoors and the virus appears to be finally on the retreat. We don’t want to be premature, but now is as good a time as any to reflect on what we can learn from the last 15 months in relation to our personal finances.

Good behaviours matter

While of course many people were simply unlucky in contracting covid, the vast majority of people avoided getting it through good behaviours. Whoever thought that we would adapt so quickly to wearing masks, social distancing and washing our hands so frequently? But we did, and these behaviours went a long way to avoiding the virus.

We see this all the time too, when it comes to managing your money and investing wisely. Good habits and behaviours make a real difference.  People who “pay themselves first” – moving savings to a deposit account as soon as they are paid each month, as opposed to savings whatever is left over at the end of the month - end up with much higher levels of savings. Investors who don’t try and time entry and exit in investment markets, but instead commit to time in the markets usually win out over the long term. And people who avoid fads for quick wins (think of Tesla, Gamestop etc.) and commit to robust investment strategies are generally much more successful.

Keep your perspective

It’s not easy to talk about perspective, as Ireland mourns the loss of almost 5,000 people as a result of covid. Every one of these was a loved person and a tragic loss for their family. Many other people were sick with covid and have since recovered. But 19 out of every 20 Irish people did not get covid at all – it’s important to remember this too.

It was very easy to lose perspective in relation to investments in March last year, as we saw stock markets fall by over 30% in a few short weeks. Panicked investors moved to cash, wise investors saw this as volatility that is simply a feature of investment markets, and they held tight. They recognised that markets go through periods of turmoil, but when you have a long-term perspective, markets have consistently trended upwards throughout history. These people were rewarded, as markets increased by over 70% by the end of the year from their low point in March. Perspective and good investment behaviours matter.

Have a plan and stick to it

Most families agreed a plan to avoid covid. They agreed who they would see, where they would go (and not go), the practices they would adopt around wearing masks and social distancing etc. – all with a view to avoid bringing covid into the house. It didn’t work for all, some people were simply unlucky. But it worked for the majority of people who stuck to their plan.

The same applies to your finances. Your long-term financial plan reflects your ambitions and goals in life and with your money. It has a carefully considered investment strategy and a plan to help you achieve your objectives. So stick to the plan.

Don’t be distracted by every so-called expert

Before we knew it, there were lots and lots of covid “experts” who were all over social media, spouting their latest theory. Lots of them had little or no medical background, very few had expertise in epidemiology. And yet they got airtime and followers, which in turn encouraged them to keep going.

We see this all of the time in the financial world, particularly when it comes to investing. So-called experts espousing the benefits of gold / bitcoin / single stocks / whatever is this month’s fad. They ignore the importance of diversification and a carefully constructed investment strategy. We are seeing a worrying explosion of TikTok videos offering so-called investment advice from very questionable sources.

Shut out the noise and listen to the professionals that you trust. They have your interests at heart and will help you steer the best course.

The pandemic and your finances have common traits. Achieving the best outcomes for you and your family comes back to clear and rational decision making, and committing to winning behaviours.