The year 2020 has been an unforgettable one. But thankfully it has taught us some valuable lessons about our economy, workforce, technology and investments.
Here are 10 of them.
1. Countries need to be more self-sufficient
It’s the end of globalisation as we know it.
The unique thing about the coronavirus pandemic (versus a regular financial crisis) is that it hit all major global economies in near unison.
The damage done to global supply chains, manufacturing and many other industries is extensive and when the crisis eases, countries will want to reemerge from the crisis entirely more self sufficient than we were this time last year.
2. An emergency fund is crucial
If the past 12 months have taught us one thing, it’s that having an emergency fund is absolutely vital.
Building an emergency fund and managing risk is a critical foundation for any personal finance plan.
An adequate ‘rainy day’ pot of money helps to cover any urgent or unexpected costs such as a job loss, pay cut or major illness or accident It’s your safety net for when the world takes an unexpected turn (as it did in 2020) exposing you to risk which otherwise wasn’t there.
As a rule of thumb, many experts say an emergency fund should be able to cover at least 3-6 months’ worth of living expenses and should be easily accessible.
However, 2020 has also taught us that while 3-6 months of expenses is a good starting point, it’s not enough in cases of economic turmoil when unemployment rates are higher, risk of lay-off is high and your income isn’t secure. All Aussies should plan to put aside at least 6 months worth and more.
3. Soft skills are more important than ever
As remote working becomes a more permanent feature of our working lives, the soft skills of good communication will become even more important.
Communication can easily get lost through technology, especially emotion and empathy, so it's vital that leaders are able to clearly and effectively communicate what they need to and when.
4. Australia needs to be careful about forgein ownership
Treasurer Josh Frydenberg has already announced sweeping changes to Australia's Foreign Investment Review Board guidelines that will mean all foreign direct investment bids will be scrutinised with the threshold abolished.
The comprehensive changes deal with national security risks, strengthening compliance measures, streamlining approval processes and administrative enhancements.
Frydenberg explains that these reforms preserve the underlying principles of our system: that Australia welcomes foreign investment for the significant benefits it provides but also ensures that investments are not contrary to the national interest.
5. Social distancing has changed our economy forever
Imposed social distancing measures might be temporary but looks set to alter how our economy works in a post-coronavirus world.
Even now restrictions are easing and workplaces are permitted to open back up, many Australian businesses have seen how straightforward and cost effective it is to have a workforce working remotely - no rent, no office bills but the same income, work life as we knew it has ended.
6. Tech development is coming quicker than we realise
Advances in technology is not a new concept, but it is a concept which has been sped up in 2020.
The coronavirus pandemic has not only highlighted the need for significant advances in technology to develop our workforce, it's shown that these things can happen at lightning speed when they’re needed.
Demand is through the roof, which means tech companies have had to step up their game. Software cycles are no longer defined in years but instead in months or weeks.
7. Robots really are taking our jobs
Australia saw an accelerated loss of unemployment in industries with workers in routine manual jobs and sectors which have struggled to operate under mandatory shutdown and the imposed social distancing rules during 2020.
Many businesses, especially factories which were already looking into artificial intelligence, have been ramping up automation in response to new social distancing measures, reduced spending and/or higher volume.
Ultimately, if a robot can do the job quicker, cheaper and more accurately then it will do.
8. It’s important to diversify your income
More streams of income equate to more security. Aussies who solely rely on one source of income are putting themself at higher risk in the event of an economic downturn and an unstable job market.
The more sources of income you have, the less exposed to risk you are. Which means, if you lost your job or your income was cut, you have another source of income to fall back on before defaulting straight to living off your emergency fund.
9. Emotions have no place in investments
The past year has also been a nail biting one for investments and stock markets.
Economic uncertainty and global volatility across nearly all markets left investors on the edge of their seats waiting for the final blow that would send global stock markets tumbling downhill.
But it never happened.
As David Gardner, co-founder of The Motley Fool points out: “Stocks go down faster than they go up, but go up more than they go down.”
He points out that the lesson to be learned from this once-in-a-lifetime pandemic is that we need to keep our emotions, and fears, well away from our investment decisions and allow the market to stabilise on its own.
10. Stockpiling is pointless
Cast your memory back to earlier this year. Were you one of those people stockpiling toilet paper, hand sanitiser, tinned food and frozen goods following news of an impending lockdown?
It’s understandable. People act out of character when they’re faced with stress, uncertainty and panic.
But what we now also know is that it’s rarely necessary.
Sure toilet paper will last forever, but do you really want a room in your house dedicated to it?
However, food expires and buying a product but failing to use it is effectively throwing money down the drain.
And that’s not including all the promotional offers you’ve missed in the meantime - more money wasted.
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