Smart Money Podcast: Listeners Share Money Lessons From the Pandemic

Sean: Welcome to the NerdWallet Smart Money Podcast, where we answer your personal finance questions and help you feel a little smarter about what you do with your money. I'm Sean Pyles.

Liz: And I'm Liz Weston. To have your money questions answered on a future episode, call or text us on the Nerd hotline at 901-730-6373. That's 901-730-NERD. Or email us at [email protected].

Sean: And hit that subscribe button to get new episodes delivered to your devices every Monday. And if you like what you hear, leave us a review.

Liz: This episode, Sean and I are sharing the money lessons that you shared with us. We wanted to hear what this wild, tumultuous year has taught you about how to manage your money, and you answered the call and shared some really thoughtful lessons.

Sean: Yeah, I was really impressed by all of the answers that we got, and I can't wait to talk about them. This is kind of our version of an end of year “best of" list, except it's all of the best money lessons that you, our dear listeners, shared with us.

Liz: This one comes from Ashley. Let's hear it.

Ashley: Hi, Sean. This is Ashley. I'm hailing from Boston with my three money lessons I've learned over the past year. The first lesson is that debt payoff is so important. I paid off my car a few weeks before the pandemic hit, and I'm really glad that I did. The second thing I learned is that emergency savings is a crucial part of personal finance. The more financial padding that you have, the more protected you are from a crisis. My third lesson to share is a dark one. I've learned how on our own we are when it comes to money. We've seen people lose jobs, housing and businesses over the past few months. And if folks were lucky, they got a one-time check for $1,200 or additional unemployment that has now ended in many states. For me, that was the greatest takeaway. Take your finances seriously, because nobody is coming to save you if you don't. That's all for now. Thanks, guys.

Sean: Man. Thank you, Ashley, for sharing that. I think that your lessons really encapsulate what so many have experienced financially in 2020. A lot of people were able to pay off their debt, especially credit card debt, but a lot of people were also having a really hard time over the past year.

Liz: So it's really that K-shaped recovery they keep talking about, if we're even in a recovery, where people who kept their jobs and kept their income coming in were able to pay down a ton of credit card debt. I mean, we saw the credit card balances drop, and personal savings rates went through the roof because there was less to spend on. At the same time, you have so many people worrying about being evicted, not being able to pay their mortgages, not even having a job. It's just been a really tumultuous year.

Sean: And to Ashley's third lesson, it does show how on our own we are, unfortunately, in this country, because of inaction at the federal level. Compared to other countries, Americans have suffered so much worse during the pandemic. Millions have lost healthcare and jobs, and have been forced into poverty because of this inaction. And to the extent possible, it really is on us as individuals and as local communities to fight for our own survival, which is deeply scary. But I think it also does point to the fact that emergency savings are so, so crucial.

And so I wanted to also talk about some ways that people can learn from Ashley's lessons and act on them. For people who are just getting their emergency funds started, we like to recommend that people start with just $1,000 in a high-yield savings account. Sometimes that'll take a while to build up. But once you get that, continue your momentum and try to have somewhere between three and six months of expenses saved. Obviously, this won't happen overnight, but it will give you that cushion that you need if something does pop up.

Liz: Even $100, $200, $300. Those small amounts can really make a big difference. But as much as we focus on the steps that you can take to being prepared, we have to keep coming up with the caveat that few people can realistically prepare for nine months of unemployment.

Sean: And again, it makes our jobs really hard, Liz, because we try to give actionable advice and we try to encourage people to do the best that they can given their circumstances. But this pandemic and this past year has shown that there's a very distinct limit to how much people can do without assistance.

Liz: If you are one of the people who's been fortunate, again, we're going to make the pitch that you think of others and try to help wherever you can.

Sean: Yes, absolutely. OK. Well, now, let's move on to the next money lesson, which comes from Mary. She wrote to us over email, and her lesson is, "I've learned that sticking with my money management routine as much as reasonably possible helps keep me focused on what really matters to me: financial stability/security.

"Longstanding habits of bulk shopping for home staples, meal planning, and auto bill pay has kept me out of the panic buying, hoarding hysteria, and the coulda, woulda, shoulda second-guessing drama that those close to me are going through. It was difficult and very painful to witness. There were moments of guilt about being better prepared that I had to resolve. No, it has not been easy sticking to my routine, but it has kept me sane."

Liz: Oh, it's great to hear from another prepper.

Sean: Yeah, absolutely. I also totally tend to over-index on maybe being a little bit paranoid and trying to find stability even in the best of times, so I'm right there with you in terms of bulk shopping. I have maybe three months of toilet paper stored in my shed that I had purchased before even the pandemic began. So I'm right there with you. It just makes me feel like I'm not as susceptible to the whims of the markets and whatever is being panic-bought at the moment.

Liz: Yeah, and as Mary points out, being prepared is more than just having emergency funds somewhere. It's also having the stuff you need to take care of yourself for a few months. But I would add the other part of this is that part of preparation is being able to share with your community. I know a lot of preppers are really paranoid about what they have and they're worried about the hordes coming and breaking down their door. But honestly, I've found it's really wonderful to be able to reach out to a neighbor in need and pass along some of the stuff that I have built up so that everybody is in a better position. I think that's what we need to focus on, is not just preparing ourselves, again, but preparing our communities.

Sean: And I do realize that there's only so much you can do to help other people, because you do need to have your own toilet paper stock shored up, obviously. But it is really important to make sure that your friends and your neighbors have what they need. I remember right at the beginning of the pandemic talking with one of my next-door neighbors, and they were really concerned about what this would mean for their family's personal finances. And just having that conversation, even though we were 15 feet away, a yard apart, I could see that she felt relieved, and I was just happy to be able to provide some consolation that there is recourse, there are things that can be done, and also that as a neighbor, I'm here to talk with her.

Liz: That's a good point, because it's not just physical things or money, we're also sharing information and ideas.

Sean: Mm-hmm.

Liz: And part of what we've done at NerdWallet is build up a pretty good resource of, OK, you can call here, you can do this, you can do that. And if you have that information, sharing it with neighbors and friends is really important. Put in a pitch one more time: 211.org. That's a place to get started if you're really in trouble and you need help.

Sean: Another thing that Mary's lesson brought to mind for me was that it's really important to find stability through routines and regular habits, because we've seen how much is out of our control. But if you do something like doing meal prep on a Sunday or setting up that auto payment of your credit card or auto deposits into your savings account, that can make sure that even though there's a lot of things changing and in flux around us all the time, some of the basic fundamentals of money management can be automated in a way that it's one less thing that you need to think about.

Liz: We talk about this when the market goes nuts, that people feel a need to do something, and really the best thing to do is nothing. It's like, "don't just do something, stand there." But if you do feel a need to do something, you can do something like increase your 401(k) contribution, do something positive rather than doing something in a panic.

Sean: And sometimes the best thing to do is to do something that isn't at all related to what's going on in the world.

Liz: Yes.

Sean: Try shutting your laptop, try doing some watercolor painting, something that I've been planning on doing over the winter break here just to have some sort of activity that's not digital and isn't reading, because I've been reading so much that I realize I need to do something else with my time. I find that, that helps me feel a little bit less stressed out, realizing that what's happening is going to happen, I've done what I can do about it, and now I need to turn my attention elsewhere for my own sanity.

Liz: Yep, and let it go. That's a great lesson.

Sean: Let it go, just like in “Frozen.”

Liz: Oh God, now that's in my head.

Sean: I know.

Liz: Thanks a lot.

Sean: Sorry.

Liz: OK. Now, let's hear the next money lesson, which comes from Kat in Atlanta. Here she is.

Kat Reynolds: Hi, Sean. This is Kat Reynolds from Atlanta, Georgia. I am not calling with a question, but answering your call to say what has changed during COVID times for me. I am a condo homeowner in Midtown Atlanta and refinanced, and so I went from a 30-year 4.6% [mortgage] to a 20-year 3.1% interest rate, which I think is amazing. So I learned a lot about refinance. And then I have been saving money because I don't send my dog to puppy play care, and I've been able to really shore up my emergency savings. So those are two ways in which I'm saving money during COVID. Oh, a third way is I'm not getting my nails done. So that's like 70 bucks a month. Awesome. Love the podcast. Take care. Bye.

Sean: I am so happy for you, Kat, and one thing that really stands out to me right off the bat is that Kat's lesson really speaks to the unexpected opportunities that have popped up during the pandemic, like refinancing. We've seen so many people that have been able to do this. Me and my partner did this for our house and shaved $400 off of our monthly mortgage costs, which gave us a lot of breathing room, especially because he had reduced hours for a big chunk of the year. So we were super happy to have that.

Liz: That was a real savings, and I think now is actually still a good time to refinance if you haven't, because the bottleneck has eased a bit, isn't that right?

Sean: Yeah. That's what I was going to say as well, because, right, the bottleneck has eased up, but the interest rates are still low. So if people haven't refinanced, I think now is an excellent time to do it, especially as we get closer to the holidays. There might be a little bit of lag because people are going to be off work, of course, but I'm guessing that there are going to be a lot of people that aren't doing it in December, but come January, they'll think, "OK, now is a great time to actually get that refi" again. I love taking advantage of lulls in the market like this, so anyone who's still thinking of a refinance, I think now, like this week, might be a great time to look into that.

Liz: And we have a lot of tools on NerdWallet. We can help you figure out what the mortgage refinance process is like, what you need to know, and how to find lenders and compare deals.

Sean: I also wanted to talk about not getting your nails done or not taking your dog to daycare. Those are two things that I also have not been doing. I love a good pedicure, but I haven't had one since March, and it just officially grew out. So au revoir to my old pedicure. At the end, it was just the weirdest French tips you've ever seen in your life.

Liz: I'll bet.

Sean: But that said, a lot of people have been saving money by not doing things like that. And it's bittersweet. It's sad to see what's happening with a lot of small businesses, but having this additional money in your budget gives much-needed breathing room to do things like Kat did, like shoring up your emergency savings and making it so that if some unexpected expense does pop up, you have that extra cushion of 70 bucks a month, plus what she's not spending on doggy daycare, to cover that cost.

Liz: I was talking to a friend who dyes her hair and she always thought she had to go to a salon to get it done. And finally, she got so desperate about the skunk stripe that she needed to do something.

Sean: Mm-hmm.

Liz: And she discovered that the $7 bottle of color from the local drugstore was just fine. Now, if that works for you, that's awesome. But I think a lot of people either did that or just decided to, if they're older, live with the gray, because coloring your hair is a lot of hassle.

Sean: Yeah, it is. I am going to be premature gray, that's for sure. I'm 29 and have a handful of them already.

Liz: Ah.

Sean: So I am happy that a lot of other people are embracing the gray. I think that it's a good step for us to counter age-ism in our society, personally. And I just think it looks cool.

But one thing that I am still struggling to balance is, as I mentioned before, the tradeoff between having that extra money in your account and thinking about the people that aren't getting that money. So, I don't know if I have a good solution to trying to support people that aren't getting that income and trying to make sure that I'm in a financially sound place. But I know some people have been just giving money to their hairdresser, for example, if they haven't been going to get their hair cut, or even just buying a gift card for that nail salon because they know eventually they'll be able to go back, but they want to make sure that they are still staying afloat right now.

Liz: Well, that's how I focus on it. I think about what small businesses I want to survive the pandemic, and that's where I'm focusing my spending.

Sean: The next money lesson is from Andrea, who also wrote to us over email. She says, "One of the things that I learned was from a major life event. My father passed away suddenly in 2018. He had no life insurance and no savings. This was after many years of telling both of my parents to get life insurance and to save for funeral expenses. I was left with the responsibility of paying for his funeral and managing his estate. This cost me $9,000. I depleted my life savings and maxed out my credit cards. I was lucky to have a job that allowed me to work overtime immediately after this event, but it did not give me time to mourn, unfortunately. One of the great learning experiences was that within a few months after, I made sure my mother had life insurance. I got a policy for my mother that I pay the premiums on each month. I also increased my own life insurance.

“In the two years since, I have almost recovered. I also max out my retirement contributions now as a result of this experience. This is to make sure that my own child is not left burdened at the end of my life.”

Liz: Oh, wow. There is a lot to unpack here.

Sean: First of all, Andrea, I'm really sorry to hear about the loss of your father and the experience that you went through. That sounds difficult, but I'm impressed and really proud of how you turned this difficult moment into a learning opportunity.

Liz: Especially when you look around and see how many people are dying without any kind of life insurance or estate plan or anything. Everybody has an issue with mortality and wanting to put this stuff off, but really, if you love the people around you, you should be thinking about this. And from personal experience, it does not take that long to get yourself covered. And by that, I mean getting some life insurance and getting your estate plan, and most importantly, powers of attorney for health care and finances. And what those do is allow other people to make decisions if you're incapacitated. So this is kind of grim, but think about what if you're on a ventilator? Who's making the decisions for you?

Sean: I'm hoping Garrett, but this is something where I know that we need to get our paperwork sorted out, and we've been meaning to do this for a while, especially because his name is on the house that we live in and we have a lot of our finances intermingled, even if it's not done so on paper. And yes, we're engaged, but we don't have everything signed yet. So I am wondering what you think might be the best way to get some things sorted out. How did you do this?

Liz: The first time I did it, I just did it with software. Willmaker is probably the best known piece of software, but you and I have access through our company to prepaid legal services. So that's where I would go.

Sean: OK.

Liz: Just sign on there and get it started. And again, those powers of attorney are the most important thing. You might hear them also referred to as advance directives. I really like the site called Prepare for Your Care. So it's Prepare for Your Care, Google it, and go right to it. It's free. It has instructions for each state. It'll walk you through it. You can just do the simplest version. You can get really, really detailed, but that basically will set you up so someone else can at least make those healthcare decisions for you.

Sean: OK.

Liz: You'll still need to do the power of attorney for finances. And again, that's really important, but I think the healthcare stuff is the most important thing to get taken care of.

Sean: And how long do you think that might take? Because I think that's beyond just fearing our own mortality and all of that. I think one of the barriers for me, at least, is that it seems like it could be very time-consuming.

Liz: It can be as time-consuming as you want. Honestly, I think you can get through the basic form in maybe 15 minutes or less.

Sean: OK.

Liz: As you get older or less healthy, you may want to spend more time really thinking through all the possible things that could happen. But given the fact that you're young and healthy, I would just do the minimum, get it taken care of, and you can revisit it later. I think people put this off because they're worried about how much it costs, how much time it will take, and it doesn't really need to take that much time to at least get your bases covered.

Sean: Fifteen minutes is nothing. I spend more time scrolling through Twitter in a day. So I think that I could probably do something more beneficial for myself than that. So that's a good reminder. Thank you.

Liz: Yeah. And when it comes to wills, that might take a little bit longer. Well, actually you do have pets, so you have dependents of a sort.

Sean: Yeah.

Liz: But a lot of times couples have real disagreements about who might take care of their children if both of them are gone. And again, I say just get something in place. You can make it perfect later and you can change things as you go along. So the most important thing is get it done. Just have something in place so that you have some protection and worry about perfection down the road.

Sean: Right. Otherwise, you'll be leaving a huge mess for your loved ones, and that's the last thing you want to do on top of all of the grief that they'll be experiencing.

Liz: Exactly. OK, part two, have you got life insurance?

Sean: I do. Yeah. I have that through our employee benefits.

Liz: Yay!

Sean: So I am totally set there at least. And I have my beneficiaries sorted out, so that at least helps me sleep at night.

Liz: Yeah. A lot of people have life insurance through work, which is great, but maybe they need more. So if you and Garrett had young kids, for example, you would need more than the two times salary that we get through work. So you'd want to go out and purchase maybe up to 10 times your salary, or even more. It depends on how much you want to have put aside for college, for example, or paying off the mortgage, things like that. Again, we have a great tool on our site to help you figure out how much life insurance you need. And it's not that hard to shop for life insurance online. Plus, a lot of insurers are now making this easier by waiving the medical exam that you used to have to go through.

Sean: Mm-hmm.

Liz: So, again, you can do it online. It doesn't have to take a huge amount of time. If you do need more, that's the way to go. Get something in place. And again, you can come back and revisit it later, but get yourself covered.

Sean: Yeah, it's one of those things, again, where you put in a little bit of work now and it will save other people a lot of pain later.

Liz: And the nice thing about the tools that we have is we've done some vetting for you, so it's not like you're going in completely blind. You're going to have ratings, you're going to have information about the various companies, and most people don't need to worry about the really expensive permanent life insurance, like whole life and all that. Just getting a term policy is much cheaper and you figure out how long you need coverage. Like, if your mortgage is 30 years, a 30-year policy could be fine. If you have young children, again, 30 years is probably good because it takes kids a long time to get set up and on their own. But you might just need something for 10 years. It all depends on what your need is and when the people around you are most vulnerable. That's what you need to think about.

Sean: All right. Good to know. Well, thank you, Liz.

Liz: Yeah. Always happy to tell people things they didn't ask.

Sean: Well, I may reach out to you again depending on how my research goes around sorting out my will and power of attorney stuff.

Liz: Yeah, happy to help.

Sean: The next and final lesson comes from Dick in South Carolina, and let's listen to what he learned this year.

Dick: Good morning. This is Dick from South Carolina. I've listened to your podcast this morning and you requested comments on what we've learned with the pandemic. I just wanted to say that I'm retired, along with my wife, and one of the pluses that we have discovered is being debt free, how much simpler that made our life these past seven to eight months, period. Thank you so much.

Liz: Oh, I like that. I mean, I'm not in favor of being debt free no matter what. I think debt is a tool rather than an evil. But I will say it's nice not having to worry about making payments if your income gets cut back.

Sean: Absolutely, because that does give you so much more of a cushion if there is a change in income or other expenses that pop up medically, or who knows what could happen, right? So having fewer debt expenses means more money that can be directed anywhere that you want.

Thinking back to Ashley's lesson at the beginning of the episode, if people are in a good financial position right now, it is a really good idea to reduce your debt obligations or try to make them more affordable through refinancing or consolidating, maybe a balance transfer card, if you have credit card debt. But also making sure that you are doing multiple things at the same time, not just focusing all of your money toward paying down debt, but again, making sure that you have that savings.

Liz: We talk about this all the time, if you have a 401(k) at work, you should be getting that full company match and you should focus on debt that's the most expensive, the high-rate debt like credit card debt. Normally, you don't need to be in a huge rush to pay off student loans and mortgages. Although I will say, if you are refinancing, think about retirement and maybe pick a term that will get you debt-free by the time you get there. So if you are, say, 20 years from retirement, a 20-year mortgage might be a good idea, or do the 30-year and make extra principal payments so it's paid off in time.

Sean: OK. Well, Dick, thank you for sharing your lesson. I'm really happy that you and your wife have been in a pretty easy place financially over the past year.

Liz: Well, I'm just really excited that people responded to the call, and I think we're going to do this again, because it's really great to hear from everybody.

Sean: I mean, just the variety of responses that we received shows how different this year has been for so many people. Some consumers had a really easy time, frankly, and were able to make the most of the opportunities of the pandemic.

Liz: Mm-hmm.

Sean: But on the other hand, so many people had a really hard year. And so it goes to show how many different realities are taking place right next to each other in our economy, in our country. And I think this helps us understand what everyone is going through a little bit better so that we can respond accordingly and be a little bit more empathetic.

Liz: Yeah, absolutely. And just as an added note, I'm going to put the links to the calculators that we talked about in the show notes. So if you're listening to this, you can go to our show notes at nerdwallet.com/podcast and find those links.

Sean: Sounds good. OK, and with that, I think we can get to our final takeaways. Do you want to kick us off, Liz?

Liz: Absolutely. First, prepare and share. Build up emergency savings and your pantry so you can weather bad times and help others.

Sean: Next up, limit your debt. Excessive debt can drag you down if your income takes a hit.

Liz: And finally, think of others. Draft a will and powers of attorney, then get life insurance if others would be financially impacted by your death.

Sean: And that is all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at [email protected] and visit nerdwallet.com/podcast for more info on this episode. And remember to subscribe, rate, and review us wherever you're getting this podcast.

Liz: And here's our brief disclaimer, thoughtfully crafted by NerdWallet's legal team. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes, and may not apply to your specific circumstances.