4 Most important Financial Life Lessons from 2020

2020 has been an unusual year in everyone’s life affecting us both emotionally and financially. As 2020 is coming to an end, I analyzed it to understand how the year profoundly affected our financial life – businesses, finances, cash flow, income, expenses, savings, investments, insurance, families, and other aspects of our life. The 4 most important financial life lessons that 2020 taught us are summarized as under:

1. Plan for Emergencies and Opportunities:
Emergencies can come anytime, from anywhere, without warning and hit you hard. Be prepared. In 2020, even the strongest businesses ­­suffered, most regular cash flow faltered, most secured jobs lost, guaranteed investments failed, youngest died, and healthiest became sick.  Similarly, new businesses, new business models came up and some businesses saw sudden, unexpected opportunities as well. Be ready and adaptive to any change (emergencies and opportunities) in life.

2020 taught us the importance of

  • Term Life Insurance
  • Medical Insurance
  • Additional Funds – for emergencies and opportunities, separately for business and personal
  • Nomination and Joint holding
  • Will and Estate Planning

2. Diversification and Asset Allocation:
In 2020, we witnessed a crash of the stock market as well as its meteoric rise, interest rates going down significantly, gold touching new highs, banks and companies going bankrupt, interest being reduced or delayed, deposits getting haircut, real estate market getting frozen, properties being vacated or rent getting reduced,  mutual fund schemes being wound up, etc. It is important NOT TO KEEP all eggs in a basket and NEVER depend on one source of income.

In 2020, we learned that

  • Risk Profiling and Risk Adjusted Returns is important
  • Diversification and asset allocation is critical. Also,
    • Debt can be risky
    • Have courage and patience with Equity
    • Gold is also an asset class
    • Real Estate is indeed illiquid
  • After-Tax Real Return on Overall Wealth is the key, i.e.
    • Tax planning and tax efficient investments
    • Inflation beating investments
    • Return on an investment vs. overall wealth
  • Return expectations need to be reasonable
  • Advice or guidance of an investment / wealth advisor can help tremendously.

3. We can Change and Make Better Financial Decisions:
In 2020, we experienced changes in our thinking, habits, lifestyle, and life. People survived without going to movies, clubs, parties, eating out, exotic vacations, luxurious toys, shopping, etc. that they never thought possible. 2020 gave an opportunity to change the lifestyle that everyone wanted to implement from “the next day”. We also learned importance of simple living and high thinking, regular exercise, healthy food habits, traditional care, etc. We also become more humble, compassionate as well as being respectful of people and of nature. 2020 taught us that we can change for making better financial decisions and becoming a better human being.

2020 taught the importance of

  • Cash flow management and living within the means
  • Understanding Needs vs. Wants
  • Controlling or avoiding debts and loans
  • Sharing financial information with the family and making joint financial decisions
  • Charitable giving or creating a charitable trust

4. Life is not a number:
We are so busy in making money, that we forget living life. 2020 gave us an opportunity to reflect on the life, priorities, importance of attached family, true friends, finding joy within, not look or depend on others’ reaction on leading our own life. There is no need for going after the once in a lifetime investment opportunity or highest return or next best thing or speculative investments or taking loans, or getting worried about EMIs or running after money and having sleepless nights. It is important to Stop Earning Money and Start Creating Wealth.

2020 showed the importance of

  • Knowing yourself financially and emotionally
  • Consolidating finances, investments and wealth for easy management
  • Goal based investing
  • Financial Planning and Wealth Management
  • Ultimately, Living a Happy and Fulfilling Life
What to do?
The first step in Wealth Management is to know your current status and then taking steps by benchmarking the best practices available. Spare JUST 10 minutes to understand HOW YOU CURRENTLY MANGE YOUR WEALTH and to learn how few simple steps can help you immensely. Your answers will be automatically emailed to you with your notes so that you can better manage your wealth ON YOUR OWN. Thanks.

About Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)

Mr. Jigar specializes on NRI Investments and Taxation. He is proud to be one of only 21 CFA Charterholders in India working as consultants. (In 2011, when he became CFA Charterholder, out of 97,173 CFA Charterholders in the World, only 697 Charterholders were in India and only 3% work as consultant; Source: www.newcfa.org). He received his MBA (Finance) from University of Illinois, Chicago, USA, CPA from USA and a Chartered Accountant from India. Jigar has over 15 years of professional experience including more than 4 years with KPMG USA’s Risk Advisory Services. Currently, he provides Wealth Management and taxation consulting serving clients from USA, UK, Americas, Europe, Middle East, Asia, Africa, Australia and India.
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