6 money lessons 2021 taught us

The past year gave us much to reflect on when it comes to how we earn, save and invest.

Farnoosh Torabi Former Editor at Large
Farnoosh Torabi is a financial strategist, host of the award-winning podcast So Money and a bestselling author.
Farnoosh Torabi
6 min read
Getty Images/erdikocak

I made some unexpected career and financial moves this year. I started a new and exciting job, shopped for flood insurance and even bought a cryptocurrency-related investment, something I swore I'd never do.

I couldn't help it. 2021 made me do it! 

The fundamentals of managing your money wisely -- living below your means, saving for a rainy day and planning for the future -- remain intact, having been proven through many generations and markets. But the stories and trends from year to year can provide us with fresh ideas and insights to integrate with our financial lives. And this year is no different.

Here are some of the lessons and takeaways inspired -- and, in some cases, challenged -- by the events of the last 12 months.

A paycheck isn't always worth it

In 2021, a record number of workers stood up for their health and well-being by quitting their jobs in a movement dubbed The Great Resignation. Demanding hours, low pay and poor benefits prompted them to reevaluate where and how they work. "People are thinking, 'Ok, is this what I want to do with my life?'" says Dan Schawbel, bestselling author and managing partner of Workplace Intelligence.

Tim Herrera, a former New York Times editor, quit his job in early 2021 after dedicating five years to the newspaper. He joined me on my podcast earlier this year to share how he made the difficult decision to resign after his health suffered. "I just had to say, 'All right, I've reached a breaking point ... this is what I need to do for my own mental health,'" he said. "And to make sure that this burnout doesn't turn into a serious, actual crisis."

The past year led me to an inflection point in my career, too. I craved working with a team again after being bottled up at home. I wanted to make more of an impact as the pandemic exacerbated wealth and opportunity gaps. Though working as a solopreneur had its advantages, it also limited me in those respects, which made joining forces with CNET a natural next step. 

Meme stocks aren't for investors. They're for gamblers 

In January, the GameStop "Short Squeeze" topped headlines, leaving many -- including myself -- puzzled by how a mass of small investors could send a struggling video game retailer's stock soaring 1,700% in a matter of weeks. (It soon crashed.) 

The phenomenon gave rise to a new focus on so-called meme stocks. Individual investors rallied on social media -- Twitter, Reddit and the like -- to drive up a stock's value, without much more of a reason than, "Hey, this is funny and/or cool."

It didn't help that the financial press and mainstream media was quick to spotlight meme stocks, drawing the interest of some novice investors looking for get-rich-quick schemes. 

Many learned the hard way -- by losing money -- that buying meme stocks may be closer to a game of darts than anything resembling a strategic approach to investing. And it's far from a slam-dunk way to participate in the stock market if you want to build long-term wealth. (It may not feel as subversive, but funding a workplace retirement plan or assembling a diverse, long-term focused portfolio with low-fee mutual funds is a more time-tested approach.) 

Cryptocurrency isn't for everyone, but it's worth a download

Can I confess? I find the topic of cryptocurrency interesting, but I hadn't wanted anything to do with it, at least not as far as my investment strategy was concerned. That probably comes across as old-school, but cryptocurrency remains a new, unproven and volatile asset class. I didn't have the stomach for it. 

And yet... 2021 got me thinking that maybe I've been too closed-minded. From bitcoin's price swings to the proliferation of NFTs to the constant chatter about crypto on social media, I was inspired to research the sector some more. I hosted a podcast series on the topic, spoke to cryptocurrency experts and pored through data and research. 

Ultimately, I walked away with reaffirmed views that cryptocurrencies were not for me. But I became newly fascinated with blockchain, the decentralized virtual ledger that records crypto transactions and so much more. My theory: While particular cryptocurrencies may come and go, blockchains are here to stay because of their practical use cases across a wide range of markets. I decided I'd take a (very) small bit of my portfolio and buy an exchange-traded fund, or ETF, called BLOK that tracks companies focusing on blockchain technology. 

Driven by crypto's restless news cycle, I educated myself and found my "in." Your "in" may be to buy a fractional piece of a bitcoin or to create and sell an NFT. Working for a crypto-related company can be another way to participate in the market. Whatever path you choose, don't be swayed to buy cryptocurrency because a TikToker told you it's cool. Just do you. 

Securing our financial data has never been more important

Financial fraud and identity theft is hardly new. But 2021 was a continuing reminder that the threats are very real and only getting worse for companies and individuals. We must be vigilant in our efforts to protect our privacy now more than ever.  

The Insurance Information Institute estimates losses to identity theft, alone, are expected to hit $720 billion by the end of the year, a $7.6 billion increase from 2020. I, for one, almost fell prey to one of the many scams earlier this year.

And as CNET Senior Writer Bree Fowler writes, suspected ransomware payments amounted to $590 million for the first six months of 2021, per the Department of the Treasury. That's about 42% more than the same time frame in 2020. 

As always: Update your passwords routinely, never reply to random texts or emails asking for personal identifying information, avoid browsing on public Wi-Fi networks and be sure you're shopping on secure websites. And if you suspect you've fallen victim to a scam or data breach, consider signing up for a temporary credit freeze to protect your identity. 

Climate change should be a part of everyone's financial plan 

The year 2021 reinforced that the cost of climate change weighs heavily on our finances. From the firestorms and droughts in Northern California to the devastating floods along the Gulf and Eastern Seaboard, more Americans came face-to-face with the financial repercussions of climate change this past year. 

For some homeowners living in flood-prone areas, this may have been the year they saw their insurance rates skyrocket. (For me in New Jersey, it was a prompt to shop for additional natural disaster insurance just in case). For others, this was the year they scrapped their homebuying plans altogether over climate change concerns in their area. 

At CNET Money, we shared a comprehensive series in November exploring the impact of the changing climate on financial issues from real estate to retirement to spending. It was the first series of its kind for us, and far from the last.

Read more: The Cost of Climate Change

ESG is not only a principled way to invest. It's profitable, too 

Speaking of financial shifts amid climate change, 2021 saw more investors eyeing so-called sustainable investments as a way to align their money with their values. That's where ESG -- environmental, social and governance -- investment comes into play. 

"We've noticed a quite intensive uptick in the number of folks who are interested in ESG investing," says Georgia Lee Hussey, a certified financial planner and founder of Modernist Financial based in Portland, Oregon. "A lot of people are just asking, 'Is it possible? Could I do it? Would it be reasonable? What does it mean? Do I have to give anything up?'"

The answer to that last question, according to recent data, is no. Investing long term in funds that focus on ESG issues is not just a feel-good strategy. It can make you richer, too. 

Analysts at the market research firm Morningstar (PDF) examined the historical returns of nearly 4,900 European funds, including 745 sustainable funds, and concluded that "there is no performance trade-off associated with sustainable funds." In fact, sustainable investments, on average, deliver a premium over the long run. 

To wrap, the events of 2021 underscored the importance of adaptability and self-advocacy in our financial lives. The year encouraged us to keep an open mind and question the status quo. And I hope we'll embrace these lessons for years to come.