Tag: Personal Finance

Here are 5 questions to ask yourself as you take a closer look at how you’ll manage your finances when things return to normal.

As public health restrictions ease and more and more people are vaccinated, we can expect life to return to something like ‘normal’ soon. The return to a semblance of normalcy will be a gradual process, however. There’s an opportunity here to start thinking about how to prepare yourself for a post-COVID world financially.

Here are 5 questions to ask yourself as you take a closer look at how you’ll manage your finances in a post-pandemic world:

#1: What pre-COVID expenses will return when things go back to normal?

Your spending habits likely changed because of the COVID crisis. You may have noticed you haven’t spent as much on travel, dining out, and going to cultural events. As a result, you may have increased spending in other areas, like online shopping or food deliveries, or saved some money.

Either way, as things reopen, we will soon be faced with a whole host of spending temptations. This may include everything from buying a cup of coffee or a meal out at your favourite restaurant to taking a trip to that dreamy location on your bucket list.

Taking some time to think about how you were spending your money before the pandemic and what you’d like to do when things return to normal can give you an idea of what expenses you will have post-COVID and plan your finances accordingly.

#2: What COVID expenses will remain (or go away) when things return to normal?

You may have reduced or cut back spending entirely on certain things such as vacations and family outings. But the pandemic may have thrown extra expenses your way as well, increasing your spending in a given category or resulting in new costs altogether.

It could be that your entertainment costs or monthly utilities increased because you purchased additional digital subscriptions or used more bandwidth. You may have taken out a loan to do some home renovations, like turning a part of your home into a workspace, which you’re in the process of repaying. It may also be a relatively small expense, like hygiene and cleaning products. If you have a family or small children, you may have seen a rise in your grocery bills or childcare fees, two expenses that are likely to remain high even as things get back to normal.

It’s therefore essential to look at how your spending habits changed during the pandemic. Do you foresee these expenses continuing? Is there spending you can cut back on or eliminate because it is no longer necessary?

#3: How would a 1-2% increase in interest rates affect your budget?

During the pandemic, the Bank of Canada slashed its policy rate to an all-time low of 0.25% to encourage borrowing and spending. You may have seized the opportunity to take on more considerable expenses or debt during this time. For the time being, it looks like interest rates will stay low. However, interest rates will likely increase as the economy picks up. This means you might earn slightly more interest on your savings account. But this also can mean that the cost of paying back your loan will be higher.

#4: What would a 1-3% increase in your marginal tax rate do to your budget?

You may have experienced changes in your monthly income during the pandemic, resulting from stimulus payments or job or income loss. But when things rebound, you may expect them to recover as well. With more income coming in, your marginal tax rate will increase. As a result, you’ll owe the government more in taxes. When the 2022 tax season comes around, you’ll need to ensure you can pay your taxes. Planning ahead involves reassessing your budget.

#5: How can you optimize your investments?

Many attractive investment opportunities arose from the pandemic. But we’re already seeing stock price stagnation and drops since January for top-rated companies during the pandemic, such as Amazon, Netflix, and Peloton. It’s important to reevaluate your investment holdings, review your source(s) of income and how they will be affected by things reopening.

Consulting with a trusted advisor is the safest and most effective way to formulate an investment plan to take advantage of current opportunities in the market while subsequently planning for the future.

Conclusion

Regardless of how your family’s financial situation has shifted during the pandemic, evaluating your current needs, goals, and opportunities moving forward can help you exit the pandemic dynamic in a financially stable fashion.

Resolutions. You might’ve made some for this year to improve certain aspects of your life, whether personal, professional, or both. It’s an equally good idea to make some resolutions as well to make the most of your money. Your financial well-being is just as important as your physical and mental health and your career.

Below you will find 5 realistic money management ideas that are easy to implement and stick to, and can have transformative effects on your financial well-being.

1. Be intentional. Set goals and deadlines.

Goals are what motivate us to push forward. Without motivation or a sense of direction, you may never achieve what truly matters to you. By setting financial goals, you can lead the life that you want.

When it comes to financial goals, it’s not only critical to write them down. Writing them down is only part of the recipe for success. You must also be clear and concise. When your goals are vague, you’ll have trouble achieving them. Therefore, it’s important to set a timeframe and deadline for each of your financial goals.

It’s equally important to ensure your goals are measurable. This allows you to track your progress, adjust your efforts, and know when you can celebrate your success. Always include a tangible number in your goal. You can then work backwards and determine how long it will take you to achieve this goal. Conquer one step at a time, be patient, and remain committed. Keep in mind that nothing happens overnight.

2. Put your finances and savings on autopilot.

Banking has become a lot easier because of new technologies. You can now receive deposits, pay your bills, grow your savings, and apply for loans at the click of a cursor or the touch of a finger. Digital banking is so popular that more than 76% of Canadians use digital channels, both mobile and online, to manage their finances.

One neat feature of digital banking solutions is that you can automate your personal finances according to your needs and goals. This means you don’t have to worry about your paycheck getting lost in the mail, missing regular bill payments, or misplacing financial documents.

Automating your finances doesn’t only help relieve stress and avoid late penalties. It can also help you get out of debt quicker and build wealth over time. By automatically making payments on your debt or contributing money to your savings, investment, or retirement accounts, you can reduce your debt and make your money work for you.

3. Create or update your will.

You may think only the rich and wealthy need wills. Or you may be worried that the cost won’t be worthwhile. You may simply avoid creating a will altogether because the subject itself can be uncomfortable to think or talk about. Whatever the reason, you should know that a will represents an essential part of a sound financial plan, and every adult should have one.

A will doesn’t just cover how your hard-earned money will be distributed when the inevitable occurs. A will also enables you to maximize your estate’s benefits and control your legacy. Perhaps most importantly, you can also help ease the burden on your loved ones during an exceptionally difficult time.

More than half of Canadians don’t have a will and millions don’t have a will that is up-to-date. Are you among them? If the answer is yes, it’s time to start writing, or at the very least, brainstorming.

4. Make it a habit to pay yourself.

What does “pay yourself” mean? It depends on your life stage and circumstances. If you’re an employee, it’s about setting money aside before paying your bills. If you’re a business owner, it may be rewarding your family for all the hard work, trials, and tribulations throughout the year, such as with a vacation.

“Successful savers take it off the top of their paycheques, invest it and let the chips fall where they may,” said David Chilton, the author of The Wealthy Barber, in an interview.

The general idea is to work your way towards financial freedom by prioritizing yourself. Saving is not necessarily an intuitive habit, but the more and more you do it, the easier it becomes. And you can even automate it, as in Point 2.

 5. Invest in companies that reflect your values.

There are many ways you can use your money to contribute to bettering the world around you. One of the most popular ways is by donating to charities, which you can receive tax credits for.

Another way you can help is by investing in companies that are committed to social good and creating positive change. Contrary to popular opinion, you can earn competitive returns and invest for the social good without sacrificing one for the other. Franklin Templeton confirms that ESG investing “doesn’t require a trade-off in terms of performance.”