Oct 13, 2020
Tips to help you manage your finances through a second wave of COVID-19
Since the onset of the COVID-19 pandemic, experts have warned of a second wave of cases and it now appears that many parts of the country are indeed experiencing this second wave.
How the second wave will unfold is difficult to determine and dependent upon a number of factors – including physical distancing, the ability to find and isolate cases, as well as tracing and quarantining measures – according to Public Health Canada.
Many Canadians are preparing for the worst while hoping for the best when it comes to the second wave and are also applying this mindset to their finances.
If you're one of the many Canadians who may be concerned about the impact a second COVID-19 wave may have on their finances, here are some steps you could consider, according to Bilal Omokanye, a TD Financial Advisor based in Toronto.
Create or revisit your budget
"A good place to start is with your budget, even if you haven't created one before," said Omokanye. "If you haven't created a budget yet, it's not too late to start."
Begin by taking stock of all of the cash flow coming into your household whether through pay cheques, government assistance programs, fixed income, or other means.
Next, separate your monthly expenses (such as your mortgage, utility and car payments) from your discretionary costs (like online shopping, entertainment and that latest gaming console you've been eyeing).
"It's important to have a clear understanding of the sources of income you have coming your way and what expenses you have going out," Omokanye said.
If your cash flow is not covering your monthly expenses and your discretionary costs, or if there is no money left over after these costs and expenses are covered, then you know your budget is too tight and you'll need to take a hard look at what you can cut back. Start with your discretionary items first so that your critical monthly expenses remain prioritized and covered.
Build an emergency savings fund (if possible)
"Once you've prioritized your monthly expenses, check to see if you're able to start – or continue – contributing to an emergency savings fund," Omokanye said. "Setting up an emergency savings account is always a good idea if you can do it. By using a savings account, you can help ensure that these funds are easily accessible should you need them immediately."
Having an emergency fund that you can turn to in case unexpected expenses should arise, is a good step to work into your budget if you can afford it. You can start with as little at $25.00 each month. You'd be surprised how quickly this regular amount can add up over time and how having an emergency savings fund can help ease the burden of unexpected expenses.
Check your budget with your financial advisor
Regardless of the economic times, it's good practice to take time every few months as well as when there are major changes to the economy (such as during a pandemic), to re-examine your budget and financial goals. If you have an advisor, checking in with them about your budget to assess your financial situation and your short- and long-term financial goals, can be helpful to decide how to move forward. If you don't have an advisor, consider making an appointment to get one.
"While you may be comfortable with your current financial plan, as the second wave proceeds, it could impact your finances, so it’s important to be open to the idea that your plan may need to change," Omokanye said.
Having a flexible mindset and being open and clear with your advisor can all help ensure that your financial concerns, both immediate and long-term, are reviewed and considered.