The world is currently feeling the financial impact from COVID-19. Whether you think things will be back to normal in two months, you think that the world will never be back to normal, or the best chances of being semi-normal will happen in 2021, you agree that the world has been dealt a financial blow. We have seen the US government add trillions of dollars to our debt in just a few short months and we have been faced with trying times. One out of six working Americans have lost their job, financial markets saw a drop of 30% (even though they have seen a big turnaround), millions are projected to foreclose on their homes, and the travel/tourism industries have been hit hard. We don’t want to sound pessimistic, but we cannot allow ourselves to bury our heads in the sand and act like nothing is happening. Remember, if you have 3 to 5-year goals or longer that you can expect valleys and mountains in your financial plan. An important key is to remember that even though things may seem terrible or amazing – financial principles work throughout good times and bad times. Financial strategies may only work for a period of time, but principles are built to last. This article will help us evaluate five principles that stand strong during this pandemic. These are not the only principles that prevailed, but they are ones that standout. 5 Financial Principles during COVID-19 Principle #1: Have six months of expenses set aside An emergency fund is the same thing as a rainy-day fund – it is having six months of expenses set aside for when an unplanned event pops up. Right now, we are experiencing a worldwide pandemic that no one saw coming. If you would have asked the average American in January of 2020 if they would have thought that every state across the country would have had a shelter in place in effect, they would have said “no way.” Most people would not have even thought it was possible. That is the thing about emergencies – you don’t see them coming. One way to prepare for these is by having half a year’s expenses set aside in a money market account. Most people that have these funds set aside have them in the stock market, but the problem with that is the drop the market took. In this situation, your six months would have actually been four months of expenses at the low, when most people were needing the funds. A money market does not make extreme amounts of money, but when the time comes the money is there. Principle #2: Live within your means. Warren Buffett says, “Only when the tide goes out do you discover who’s been swimming naked.” There have been so many companies across the country that have gone under or are barely staying afloat that most would assume are great businesses. It is human nature to assume that people buying nice cars, living in nice houses, sending their kids to private schools, and buying nice accessories are financially stable. What we don’t see are their credit card bills and bank accounts. When you live within your means, tough times might sting but they won’t wipe you out. We all know the basic principle stated here, but a lot of times we get comfortable and we can make our finances work even if we live a little beyond our means. The problem is that when people live beyond their means, it is human nature to want to spend more over time. Well, when you are already living beyond your means and you spend more, you are now living well beyond your means which puts you in a tough spot. Living within your means is making a budget and deciding to not spend more than you take in. It’s simple, but not easy. Things always pop up – especially if you have kids, and that is why it is so important to have wiggle room in your budget for unaccounted for things that are a necessity. Principle #3: The borrower is servant to the lender. “Debt” is a word that people sometimes look at as “taboo” or as a “resource/tool”. Whichever way you look at it you could be right. There are types of debt that are healthy and make sense, but there is also debt that you need to avoid. We will not debate the different types in this article, but we will evaluate the principle to see the truth in it. No doubt there are people all around the world right now that are wishing they would have avoided borrowing money. Some might have used it to buy a house, a business, or college loans that they saw as providing value and room for growth in their life. Others may have used the money for things they did not need to impress people they do not care about. Either way, when your income is on the line and when financial markets are spinning out of control, debt loses value in most people’s mind. A friend recently purchased a nice $50,000 toy right before COVID-19 made its way to mainstream media. Now three months later, he is sitting on a toy that has lost $5,000 in value and he and his family are still making payments on the $50,000. His income has dropped drastically due to current situations, he does not have the extra cash to buy it out right and payments are getting tighter and tighter. In this case, his “borrowing” has led him to feeling like a “slave” to this purchase. In most situations, debt does not feel like you are dragging a ball and chain; however, when a financial crisis hits the reality of this principle comes to life. We have seen a lot of these since 2000 with the stock bubble burst, financial crisis in 2008/2009, and now COVID-19 in 2020. This is nothing that should cause us to live in fear and operate by putting our money under a mattress, but the truth in this principle should show us that if we don’t have the means to pay the price if things go south – we should probably evaluate our decision to borrow. Principle #4: Do not gamble on the pot of gold at the end of the rainbow. This principle might not apply to most people reading this article, but there are several truths that run parallel with this fact. A lot of us have purchased a stock that one of our friends have told us about because we felt that it would take off and the “Fear of Missing Out” kicked in and we bought some. Some of us have jumped in on some type of business without having all the facts and the knowledge particular to that business endeavor because we allowed emotions to get in and think we were going to be super wealthy if everything went right. Let’s face the facts this is a type of gambling and betting on the pot of gold at the end of the rainbow. Now most of the time we are not “going all in” but we are being ignorant with our resources. I’ve learned in life that when I am not a good steward with what I have, it will soon be departed. Whether it is a relationship, a job, a sales opportunity, or investment due diligence. We must make sure that we have knowledge on the subject in which we invest. I had a friend who once put $10,000 in for rights to a website name that would allow him to sell used items on specific campuses in a specific state. He was so excited, and I must admit that I almost jumped in too, given his excitement. Something did not feel right though, and I decided to pass. A year later I asked him about it, and nothing had happened with the website and he hadn’t made a penny off it. The company went under and he was left with a website domain – never have I been so excited that I did not let the fear of missing out put me in a position of throwing away my money. Principle 5: The Slack Hand Leads to Poverty, but the Work of the Diligent Will Lead to Riches. You do not need a crisis to see this principle, but it is one that has stood the test of time. The point here is to make sure you do not get lazy, but that you try to be the best in your field. Laziness leaves you depending on other people, but diligent workers are in high demand. My family has a recreational property that we plant corn on each year. The manager of this project is in high demand from many other people because he does quality work and he is a man of integrity. There are a lot of people who can drive a tractor, but depending on them to do what they say, show up when they say they are going to be there, and be prepared when they get there is a totally different story. Business owners hire people with integrity. The two characteristics we look for when hiring people are hard work and integrity. The word “diligence” sums both up very well. If you need work, evaluate your life to see if you are a man or woman of character. Someone that will show up and give their best, someone who will use their own time to learn more about the trade you want to excel in so that you can become the best there is. These are the type people who will be able to make it through any financial crisis.