Saturday, May 28

7 personal finance lessons from 2021


“Your best lesson is your last mistake”


WHEN any year comes to an end, we are filled with a level of excitement in us. Excitement for a new year, new hope and new goals. But what is fueling this excitement? Was 2021 better than you had planned? Great! Or, was 2021 “I don’t want to talk about it” type of a year?

Reflecting on what went well or bad from 2021 is the best way we can prepare to make the next year even better.

Now more than ever, it’s important for all of us to take a moment to reflect on our personal finance for 2021. We need to understand what we all went through and try to grow positively from the personal finance lessons learned this year.

Below are seven personal finance lessons we can reflect on:


Nothing is permanent

What happens when one loses their job or business slows down?

As unemployment rates spike and business not going as usual, many are struggling to maintain the current life standard. Income loss can impact you, not only financially but emotionally, too. This pandemic has taught us life is unpredictable and change is constant. If you have a permanent job, appreciate that and plan for possible challenges in your career. Developing a new source of income or developing new skills will be helpful in a crisis. Our current income is not guaranteed in the future.


Financial literacy is essential

The pandemic that began as a new health threat, turned into a bigger crisis, impacting not only our financial but mental well-being too.

With so many facing unprecedented financial problems, we will never be able to overcome the crisis if we don’t make financial literacy a priority right now. We may never know the exact outcome of the pandemic if we had significantly higher financial literacy. However, it is certain that more financial knowledge could have helped make life a little more comfortable for many people in these uncomfortable times.


Cash is king

Emergency fund cannot be accumulated during an emergency. An emergency fund is money that is set aside to cover any income loss or unexpected expenses. Can we buy a car insurance after we have met with an accident?

‘Likewise, we can’t raise an emergency fund when we are going through a financial downhill that comprises loss of job or reduction in income due to an economic downfall or a pandemic. When going through a crisis, the first thing you will need is liquid cash to manage your daily expenses and to pay your bills. Hence, your emergency fund must be very much accessible with ready-to-use money in it. Ideally, this fund should be in the form of a fixed deposit or money market.


Minimalise to maximise life satisfaction

It’s all about realising that we don’t need much to live a happy life. Excessive consumerism, bigger house, better car, more clothes, latest electronics do not develop financial well-being. Abraham Maslow, an academician, found that all human beings have five levels of needs to be satisfied. We realised this only during the lockdown.

When our government announced the MCO, we realised the importance of physical survival, safety needs and love. According to Abraham Maslow, food, drink, shelter, clothes, sleep and feeling safe with loved ones are sufficient for humans to survive.

The moment we reduce our ego, our needs will also reduce, which leads to less desires and less financial ego. True financial success is not the wealth we have, it is also the inner happiness we develop called, financial wellbeing. Focus on financial wellbeing rather than financial success.


Less priority on financial planning

With a better financial plan, we will have better resistance in our life. Financial planning is a step-by-step approach to meet one’s life goals. A financial plan acts as a guide as you go through life’s journey. Essentially, it helps you be in control of your income, expenses and investments such that you can manage your money and achieve your goals. For many of us, the financial plan may consist of an insurance product, unit trust, robo-advisor or stocks.

Most people think once you have acquired a financial product, you have developed a financial plan. Trust me, financial planning is not about acquiring a financial product; financial planning is a comprehensive mechanism for your wealth accumulation journey.


Diversification is must

During financial crises, when one industry is impacted, others usually go up. The pandemic has grounded all forms of transport, tourism and other industries. So, it is critical to distribute your investable cash into different asset classes. Diversification is to minimise investment risk. If we had a crystal ball of the future, we would pick one investment that would perform perfectly for as long as needed. Since the future is highly uncertain and markets are always changing, we need to diversify among different asset classes.


Stop accumulating debt

Dealing with debt can be tough under normal circumstances. During a crisis, it could add even more financial pressure on us. Because debt can limit our flexibility and options in how we want to spend or save our money, the faster we are able to pay down and pay off our debts, the sooner we are able to free up our budget for other priorities.

Tackling your debt takes time and effort but combining strategies and staying consistent can help you successfully dig your way out of debts.

The pandemic has created a financial storm for many, and it has not been easy to weather some of the changes. While the challenges and setbacks might have shaken confidence, they’ve also pushed many to take a hard look at their finances and really think about what they could do better.

The financial lessons you take away from this extraordinary situation can help inspire you to make the changes you need to improve your financial health in the new year.


Gunaseelan Kannan, CFPCERT TM, a Financial Adviser Representative by Bank Negara Malaysia and a Licensed Financial Planner by Securities Commission (CMSRL/B4198/2013), is currently pursuing his Doctorate research on entrepreneurship, financial planning and financial technology. He also lectures on accounting, finance and business fields in Asia Pacific University of Technology and Innovation (APU). He is the Winner of Malaysian Financial Planner of the Year 2020, from Financial Planning Association of Malaysia.He can be reached at

This pandemic has taught us life is unpredictable and change is constant. Developing a new source of income or developing new skills will be helpful in a crisis.