Jul 15, 2020
How to rethink your financial goals in the age of COVID-19
Many Canadians have experienced challenges with their personal finances due to the COVID-19 pandemic, while others have continued to work and been able to save money as a result of reduced spending.
No matter how your finances have been impacted, it's always good practice to take a moment to revisit your financial plan after any major life or financial event to help ensure it is reflective of your new situation, according to Rubina Qassamali, a TD Financial Advisor in Calgary, Alberta, who shares more advice below on revisiting your finances in the current environment.
What would you say is the first step Canadians should take when reassessing their financial future?
RQ: First off, everyone needs to know where they are before they can figure out where they are going. In my opinion, the first step is to do a full self-assessment of their finances. That means looking at how their income and savings may have changed over the past few months and what it currently looks like, as well as the status of any loans, mortgages or lines of credit.
Once you've done that, you're going to want to determine your priorities, both now and in the future, and create a plan that is realistic and fits your lifestyle. You should decide what is most important to you and your personal circumstances and adjust your plan accordingly.
For example, should you focus on paying down debt or saving money to establish an emergency fund, or are you more focused on longer-term priorities, such as planning for retirement or buying a home?
It's okay to not have the answers to all these questions right away. That's where a financial advisor can help. We can help you figure out what to prioritize and how to create a realistic plan that can help get you where you want to be, financially.
Many have seen their finances adversely affected by the pandemic and are worried about how they're going to recover. What do you recommend?
RQ: While we're gradually starting to see stores and businesses open again, there's a lot about the future that remains uncertain. So much has changed in the past few months on an economic level, and we're likely to continue to see changes for some time.
Consequently, the most important thing to do is to be prepared for the unexpected. You can do this by developing a budget and sticking to it as best you can, and revisiting it anytime your situation changes. Look at where you're spending your money and separate your spending into needs – such as food and housing costs – and wants – such as entertainment and eating out. If and when you are in a position to start saving, consider setting up pre-authorized payments to help save money on a regular basis.
For your customers who have been able to save money during the pandemic, what do you think they should focus on?
RQ: Many customers who have been able to save money during this time are asking about whether they should be saving their money or investing it, and what they should be doing with investments that are underperforming.
If you're in this situation, my advice is to make sure you're prepared for the unexpected. For example, an emergency fund with enough cash to cover several months of household expenses is a good place to start. Then you can turn your attention to planning for different life events and personal goals, whether that's buying a home, funding education or planning for retirement.
Many younger Canadians trying to enter the job market or those who are early on in their careers are currently facing financial challenges. What kinds of discussions are you having with younger customers?
RQ: We're seeing many young people who are looking to apply for some of the government programs that are available, whether that's the Canadian Emergency Response Benefit (CERB) or the Canadian Education Savings Program (CESP). Some of those who own homes are asking about mortgage deferral options, or deferring payments on other loans, and what the long-term implications are if they choose to apply for those deferrals. Others are looking at ways they can diversify their savings. For those young people who are employed and looking to invest, they're trying to figure out if it's better to pay off their debt first or invest now given a volatile market. A financial advisor can work with these customers to develop a personalized plan they can stick to now and always revisit in the future.