The Lessons We Can Learn from Times of Financial Crisis

It’s time to step back and take a look at how you weathered the coronavirus crisis. Did your cash hold up? Does your job feel secure? Your answers could reveal the need to make some adjustments for the future.

It might be hard to believe, but summer is just days away — which also means we’re months into the crisis caused by the global COVID-19 pandemic.

This has impacted all of us in some way. Perhaps you’ve felt it directly through a layoff or a loss of income. Maybe it’s made a more indirect but still difficult impact on your life, through the disruption of your normal day-to-day, the forced switch to remote work (and schooling, for parents and students), the lack of access to the places we love going and the people we most want to see.

There’s no denying that we’ve all experienced anxiety, stress and upheaval — and we don’t know when (or if) things can revert back to how they were before this winter. What we can do, however, is learn from this experience.

What Times of Crisis Can Teach Us

Although no one wishes for an event like this to happen, the fact is they can and they absolutely do. That might be the most important thing anyone can learn from the experience of the pandemic: Crises are inevitable. Life will throw us curveballs. We can expect the unexpected.

We can’t predict what the next crisis event will look like. But we can prepare for it. That’s true even if we don’t know when it will happen, either.

There are a few fundamental, preventive measures we can take — all guided by the lessons we can learn from this time around.

Take the Opportunity to Get to Know Yourself

There’s nothing like experiencing a tough, trying or anxious time to understand how you truly respond to uncertainty, stress and risk. A good question to ask yourself right now is, how did you react to current events over the last few months?

Specifically, you may want to consider if you like risk as much as you said you did in the past when it comes to your investments. Did realizing some of the risk of investing and seeing unrealized losses in your portfolio spook you more than you thought it would?

If you felt tempted to get out of the market back in March 2020 — or if you actually acted on those emotions and sold or moved to cash — what can hindsight tell you now? The answer is, if you see where the market is today in early June, you may have overreacted.

And if you did react emotionally or in a way that feels irrational when you look back from the vantage point of a market that smoothed out some of its volatility, don’t beat yourself up for it. It’s understandable.

But take this as a lesson learned. If you realized you didn’t stick to your investment plan this time around, what will you do differently the next time a crisis (or second wave of this pandemic) comes along?

Commit to your action steps in writing. Then, when you feel tempted to respond emotionally again in the future… refer to your commitment, and stay the course.

Are You Truly Prepared for an Emergency?

Another aspect of your financial life to take a look at is your emergency reserve fund. Financial experts always preach not touching cash savings that you set aside for the unexpected unless it’s a true emergency — and many people found themselves in just that situation when their job evaporated or they took a massive pay cut.

Now is a good time to take stock of what happened in your life. Did your emergency fund hold up to support you when you needed it to do its job? Did you have enough in cash? Or did you even have too much in cash?

If you found that you depleted your savings, building that back up – to a level above its previous mark — may need to be a priority on the other side of this crisis. And if you realized you’re sitting on far too much cash, your action may be to deploy some of that excess into the market so it can get to work for you.

On a similar note, it might be a good time to evaluate your career. Is your job as secure as you thought? Has your field changed the way it does business? Does this put you in a stronger position, or give you the perspective you need to seek new opportunities?

For example, as an advisory business that works with over half of its clients virtually, our firm was well-positioned to handle the crisis from a technological standpoint. We are also well-positioned for the future as we believe more and more our clients will realize they may prefer a Zoom call.

While you might not need to make a major career shift, a time of crisis is a good reminder to, once we’ve regained our footing, consider how we can be more adaptable with our work and our ability to earn an income.

What Could You Do Differently?

As you have navigated the past few months, did you feel like you had everything under control — or did this highlight how many items on your financial to-do list are outstanding and in need of attention?

Now is a good time to take stock of what just happened… and what you wish you had done leading up to or during the most stressful periods of the recent past. That might look like getting organized, taking care of items you’ve been putting off, or even reaching out to get help with proper management of your financial life.

If this event made you realize you could use a little more support and guidance to ensure you stay on the right track with your finances, let us know. Our purpose is to help you navigate through uncertain times and challenges, so that you can get to the other side with your financial plan in tact and remain on track toward your biggest financial goals.

About the Author

Paul V. Sydlansky, CFP

Founder, Lake Road Advisors, LLC

Paul Sydlansky, founder of Lake Road Advisors LLC, has worked in the financial services industry for over 20 years. Prior to founding Lake Road Advisors, Paul worked as relationship manager for a Registered Investment Adviser. Previously, Paul worked at Morgan Stanley in New York City for 13 years. Paul is a CERTIFIED FINANCIAL PLANNER™ and a member of the National Association of Personal Financial Advisors (NAPFA) and the XY Planning Network (XYPN). In 2018 he was named to Investopedia's Top 100 Financial Advisors list.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
The 10 Best Closed-End Funds (CEFs) for 2022

The 10 Best Closed-End Funds (CEFs) for 2022

These high-yielding CEFs won't just significantly boost your portfolio income. They'll also allow you to buy their underlying stocks and bonds at a di…
January 12, 2022
Sweet Silicon: 5 Superb Semiconductor Stocks for 2022

Sweet Silicon: 5 Superb Semiconductor Stocks for 2022

If 2021 was a good year for the chip industry, 2022 could be downright great. Here are five semiconductor stocks if you're seeking out growth.
January 11, 2022


7 Financial Planning Strategies for Your Own ‘Great Resignation’

7 Financial Planning Strategies for Your Own ‘Great Resignation’

Anyone itching for a career change is in good company right now, but they need to think a few things through before taking the leap.
January 26, 2022
Could the Stock Market Crash for Real? Here’s How to Prepare

Could the Stock Market Crash for Real? Here’s How to Prepare

After a long march to record heights, the stock market tripped into correction territory in January. How should you react? Thoughtfully.
January 25, 2022
The 60/40 Portfolio Is Dead. Long Live 33/33/33.

The 60/40 Portfolio Is Dead. Long Live 33/33/33.

A portfolio of stocks and bonds used to be the gold standard, but it just doesn’t cut it anymore. It’s time to throw some alternative investments into…
January 25, 2022
The 4 Phases of Retirement

The 4 Phases of Retirement

Retirement means more than no longer working 9 to 5. There are four phases of retirement, and you should be prepared for each one.
January 24, 2022