We have never been in a situation where families and individuals are staying home for a prolonged period of time without having the choice to change the scenery and the fear of staying healthy at all costs. There are many families who depend on a sole income provider whose income has been significantly reduced or has been laid off. The strain on the finances can intensify relationship issues and bring out feelings of loneliness and being inadequate.
This stressful situation has also impacted our emotional spending as we are now spending more time in front of our screens, feeling the pressures of not having control over our own lives and being able to spend on items that create a sense of normalcy has become the norm. With restaurant closures, Uber eats or skip the dishes have become our go-to apps to re-ignite our taste buds with the triple fried goodness we had taken for granted pre-covid. Even though the spending might be doing us more harm than good, but the instant gratification makes us feel powerful and in control.
If there’s one thing we’ve all learned during the COVID-19 crisis, it’s the importance of personal finances. Whether you find yourself in a ‘good’ situation or you are panicking about how you’ll pay your bills, it’s a great time to revamp your finances; understand emotional triggers, create a spending plan, review your investments & Insurance and try to stay mindful.
Understand your spending triggers and create boundaries.
There are a number of ways to help reclaim your emotional spending and improve your financial position. Start becoming conscious of when you spend your money:
- Is it when you have been browsing through social media and you feel that the online flash sales are very enticing? Then let’s be mindful of our usage. According to the Pew Research, The longer and more often people use social media, the more ad preferences the site lists about them.
- Therefore, it is important to allocate blocks of time throughout the day that are dedicated for social media i.e . three 15-minute blocks when you can log in. This will help you in reducing the overall time spent on social media, feeling like you are missing out, being enticed to spend money and wasting time whenever a notification chime reels you in every two minutes.
- What about your email that is often bombarded by retailers who know how to speak to your very soul? There are two forces that are usually at play: retailers know your purchasing history and will suggest complimentary products and they also hope you saved your credit card info online for your convenience. In order to regain control, it is best to unsubscribe from retail mailing lists and delete your credit card info online.
- By unsubscribing from email lists, you will avoid seeing statements “ to act now or you will miss the deal of a lifetime”, I can guarantee that your bank account will love you. By also removing your credit card info online, you are able to give yourself time to question whether the spending is warranted or it’s an impulse purchase.
Be lean and see the opportunities that exist
If you find yourself with your work hours reduced or without a job during COVID-19, don’t panic. There are benefits specially created for those affected and it’s important to understand which benefits fit your criteria by visiting the Canadian Economic Response Plan.
Once you begin to receive the benefits, reassess your spending plan. Do you know how much it takes to support yourself or your family on a monthly basis? You need to know this number because it will help you to determine whether your expenses are being managed or you really need your finances to be extra lean. This might sound counterintuitive if contributing towards your investments or even retirement is negatively affecting your monthly number, pull back for now until you are balancing again.
What about expenses that are being incurred on autopilot? Things you are paying for that you don’t need right now? Start kicking these expenses to the curb by taking a pen and paper (excel file) and reviewing your income and expenses. The cutbacks can include:
- Eating out (Uber Eats, SkipTheDishes, DoorDash)
- Entertainment
- Shopping
- Memberships or subscriptions
- Cable
- Auto insurance & utility bills (that can now be negotiated)
- High interest credit cards & loans (asking your lender to reduce interest or defer payments)
Not everyone is facing the same financial situation. If your income was unaffected, you can afford not to stress about your finances and you have the option to tackle some financial goals that were not being addressed before such as paying down debt or saving/investing.
In a situation whereby as a couple, one person’s income was affected by Covid19 and they are receiving CERB benefits, they can focus on allocating that income towards savings in a high interest savings account to build their emergency fund or for investment purposes while the higher income spouse pays expenses, this ensures that the family’s total investment income is taxed at the lowest possible rate.
Review your investments & Insurance
For many of us when the markets were swinging wildly, there was a general feeling of nausea when we saw our investments decimated and we were even tempted to pull out of the market. The investment world is filled with peaks and valleys. If you pulled out during those moments of high volatility you were guaranteed a major loss. If you rode it out though, you now found that the prices did increase and you are close to breaking even and that’s why reacting rashly can be a costly mistake.
- Make sure to connect with your investment professional as they may be more aware of your unique goals and make calculated adjustments. It’s also a good time to review your investment plan to remember why you were invested in the first place so that you continue to persevere despite the uncertainty.
This is also a good time to review your insurance policies. If your insurance was tied to market performance (Universal Life Policies), how did the market decline affect your policy? Will you still have insurance coverage by the time you reach age 65 or will the policy collapse unless you increase your premium? For those of you who don’t have insurance coverage especially when you are carrying mortgage balances, what else do you have in place to mitigate against any financial hardship your family might face if you were to pass away prematurely? Do your children also have life insurance? The reason why parents may choose to have permanent life insurance on their children’s life is because they want to lock-in the lower priced premiums and the health factor (when your children grow the beneficiaries of the policy can be changed to their own children.
- It’s important to discuss with your insurance broker and let them know how this situation has provided you a different outlook on your insurance needs that you didn’t know existed before.
Staying mindful
If there’s one thing we can all focus on during this time, it is the importance of staying mindful. It’s so easy to let the negativity get the best of us when we focus on what we ‘can’t have.’ What if we focused on the ‘good’ going on during this time? Focus on the following:
- You have more time than ever with your family. Make it quality time!
- You have your health and you are staying safe, appreciate it.
- You have time to do things you may not have had time for before.
- You have more time than ever to connect to those that you may not talk to or see often, just use technology!
- While COVID-19 certainly isn’t something we enjoy, you can make the best of it by staying mindful and connected. Use this time to get yourself financially secure and to cut back on things that you are quickly realizing aren’t necessary. It’s amazing what we can do during a time that we are forced to slow down and enjoy life.
If there are any topics you would like to learn more about, or if you would like to schedule a complimentary financial consultation, please email info@elleverity.com! We look forward to speaking with you soon!
This article is intended to provide general information and for discussion purposes only. Accordingly, the information in this article is not intended to constitute accounting, tax, legal, investment, insurance, consulting or other professional advice or services. Please consult a qualified professional advisor before making any decision or taking action that might affect your personal finances or business.
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