The global Coronavirus (COVID-19) pandemic won’t last forever. When it is over, the first thing you should buy is an emergency fund.

Exposing Weakness

In a letter to shareholders during the last economic decline in 2008, Warren Buffett said “You only learn who has been swimming naked when the tide goes out.”

At the time, real estate values were dropping across the country and mortgage-backed securities were an important domino in a cascading failure that has become known as the Great Recession. He was referring to mounting evidence that financial institutions had been protected by rising asset prices, and when those assets started to lose value it was very bad. In fact, he said, “what we are witnessing at some of our largest financial institutions is an ugly sight”

He was writing about a very specific circumstance at the time. But his wisdom applies to all historical economic declines as well as today’s pandemic-induced free-fall.

Pandemic Economic Fallout

If the falling economic tide has impacted your personal finances, you are not alone.

Initial Unemployment Claims hit a record high of 6.6 million in the US, which is about 10x the previous record which was set in 1982. (Data from

Non-farm payroll swung from an increase in February, to over 700,000 loss in March. And, that does not even count the two weeks with massive Initial Unemployment Claims.

The Hospitality Sector is taking the biggest dip, with over 65% of those job losses happening in the Leisure & Hospitality Industry.

The tide is definitely going out.

Cavalry is coming… with possible delays

There are reports of state unemployment agencies being overwhelmed by this increased volume. Yes, payments will go out on time if you can apply. But, websites have been crashing and getting through to a call center is nearly impossible in some places.

As a result, it is possible that some people will see a one- or two-week delay in receiving their unemployment benefits. Yes, they will still get the full amount plus an additional $600 per week from the Coronavirus Stimulus Bill. But, there will likely be a week or two gap in their pay.

That bill also includes $1,200 per person, plus $500 per child direct payments to most Americans, help with Student Loans, and benefits to small and large businesses of all kinds.

Over the next few weeks and months cash is going to flow out from Washington and into the hands of nearly every American. But, that will all take time.

For Americans that were living paycheck-to-paycheck prior to the pandemic, a week or two delay could be a disaster for their finances.

What if you don’t have reserves

If you can bridge the gap, your finances will likely be fine. In fact, with all that stimulus, many Americans will take home more cash in 2020 than they otherwise would have.

However, if you live paycheck to paycheck, it is a different story.

If you draw your finances to zero during every paycheck then this scenario is terrifying.

If this is you, then you are not alone.

There are a number of reports that track this, and while the numbers vary depending on the methodology, they all agree on one thing: Most Americans don’t have emergency reserves.

Adding insult to injury

A pandemic is scary. People are wearing masks and gloves to buy groceries. We’ve been ordered to stay at home. New York hospitals look like war zones.

For many of us, there is the added fear of running out of money.

For too many of us, it is too late to prepare for this emergency.

This is not about “I told you so.” Do what you can and ask for help if you need it. Survive.

Emerge and thrive

When this is in the rear-view mirror, let’s use this opportunity to light a fire. Let’s all harden our resolve to never let this happen again.

A year from now I want to be reading news reports that the number of Americans living paycheck-to-paycheck has plummeted. I want to hear that overwhelming numbers of people have buckled down, gotten on a budget, created a savings plan, and took their financial well-being into their own hands.

Can you imagine what it would feel like if the only fear you had to deal with right now was the pandemic?

What if you knew that you could pay every bill in April, even if April Unemployment benefits don’t come until May?

Then, when this is over, the first thing you should buy is an emergency fund.

How to get started

As soon as you see a light at the end of this tunnel, open a new, separate, savings account and start putting money in there as often as possible. Built it up until you have enough to cover at least 3 months of expenses. Then… never touch it.

We are living in the single biggest and sharpest decline in US history. And yet, the government will get benefits to nearly everyone in less than a month. If you have 3 to 6 months’ worth of expenses in savings, you can weather just about any possible storm.

Emergency reserves change everything.

It is also important to note that if you have high-interest debt (like credit cards or payday loans), you may need to clean that up before you open this savings account. The order really is up to you. Yes, the least expensive way to build an emergency fund is to knock out high interest debt first. But, the fastest way to get a fund up and running is to save first and knock out debt after.

You do what’s right for you. I generally prefer eliminating high-interest debt first. But, if the peace of having a fully funded emergency fund set aside is worth paying that extra interest for you, then go for it.

Side note: I only recommend savings or money market accounts for emergency reserves. CDs are too illiquid, and investments are too volatile. Often, your emergency will coincide with a national downturn, which is the exact wrong time to sell stocks, and why investing your emergency fund is asking for trouble.

What if you’re broke

Before you tell me that you don’t make enough money to save, let me ask you a few questions:

  • Have you eaten in a restaurant in the last year?
  • Have you watched a movie in the theater?
  • How much is your cable bill?
  • Have you been on an airplane (not for work)?

If so, then you chose entertainment over savings.

As always, this is a judgement-free zone. I am not suggesting any of that was wrong. What I am suggesting is that if you get motivated to build an emergency reserve, there are likely areas in your budget where you could make short-term changes.

I don’t care how you build your emergency fund. You could use my Undetailed Budget. You could use my entire strategy for escaping paycheck-to-paycheck life in part one of my book. Or, you could use Dave Ramsey’s Baby Steps. Or, you could use one of the literally thousands of approaches sprinkled across the internet.

The most important thing is that you do it. Channel that fear and anxiety you feel today into a positive change in your life.

Final thoughts

This global pandemic is going to be a defining moment in all of our lives. We will remember it and tell our grandkids about it. COVID-19 is this generation’s 9/11. It is the Cuban Missile Crisis. It is Pearl Harbor.

Just like those other pivotal crises, life will be different when this is over. In some ways we will get back to normal, and in other ways we won’t. Society will evolve.

My hope is that at least one good thing can come out of all this. My hope is that a significant number of us decide to change our finances so that we are not exposed to this kind of risk ever again.

I hope this has been helpful! I welcome your comments with your thoughts and questions. And, don’t forget to subscribe to the newsletter to get notified whenever a new article is posted.

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