5 Tips for Surviving Economic Uncertainty

Posted on: March 2, 2022

By Karin Mizgala, CFP®
Co-founder and CEO Money Coaches Canada

As uncomfortable as the pandemic has been, this collective “time-out” offered us the opportunity to reflect on what is working well in life and in our world, while shining a light on what isn’t. For Sheila and I, it’s been an important reminder of why we left the traditional financial planning industry and created a company based on our values of service, transparency, trust and collaboration.

financial planning We have had plenty of conversations with our clients over the past two years, and while they were not immune from the financial and emotional turmoil, they have been more financially prepared and resilient than most.

The current crisis has strengthened our commitment to the work that we do and the clients we serve. We know that Canadians need us and our fellow advice-only financial planners now more than ever.

Here are the top five tips we’re sharing with our clients to reduce stress during economic uncertainty.

1. Figure out how much you need to cover your expenses
This might seem like a scary exercise, but is actually very liberating. Worrying about how you would survive on a reduced income is all the more anxiety provoking when you don’t know how much you need to live on. Figure out what your basic expenses are – chances are you are now spending less than usual on extras and you can be more realistic with what your Needs vs. Nice-to-Haves are. Get started with our Spending and Savings Plan worksheet.

2. Develop new Cash Saving Habits
Meal Planning
Take this opportunity to develop cost saving habits at home. Food prices have risen considerably in recent months. Meal planning is a great way to ensure you use all the groceries you are buying and not wasting money by throwing out food you don’t eat. This means you’re efficiently spending money and ensuring you and your family are making healthy dietary choices.

Cutting back on “Nice-to-Haves”
Take the time to re-examine your spending habits and priorities. Due to the pandemic, we were forced to do without some luxuries, for example that regular trip to the salon for manicures. While a nice treat, maybe you discovered you don’t need to do it that often, or perhaps only for special occasions. Other discretionary expenditures like travel, eating out, or home décor are ones that you want to re-evaluate. You don’t have to eliminate them entirely, but cut back on them and re-direct funds to debt repayment or savings.

3. Build Your Emergency Fund
In tough economic times, having the added security of an emergency fund is reassuring and in some cases critical. If you’ve been able to build an emergency fund and are strapped for cash, this may be the time to use some of those funds. If not, you may have a line of credit which may come in handy to cover some of your expenses in the short run.

If you find you have extra cash at the moment, you can start or add to your emergency funds by saving any money that you’re not spending on travel, going out for coffees, meals or after work drinks. While painful, you can make the restrictions work for you!

4. Remind yourself why you invested, not what’s happening in the markets right now
It’s hard not to ‘take the money and run’ when markets are turbulent, but before you cash out, reflect back to your original investment goals. If your retirement is more than 7 years away, there is time for the markets to recover and there are bound to be ups and downs along the way. If you are already retired, if possible fund your expenses with money you receive from your pensions, or have in cash or other liquid investments, to cover your needs while your investments recover.

If you don’t have cash savings when your investments are down, speak with your investment advisor to ensure that any withdrawals to pay for your needs are coming from the bond or cash portion of your portfolio.

It’s now especially important to take a longer view of investments. If you weren’t planning to cash in all your stocks or mutual funds now, it’s no time to panic and change those plans. Markets move in cycles and this is unlikely to be the exception. Work with your investment advisor to determine what the right move is for you…which may be no move at all!

5. Get Support
There are federal and provincial initiatives to assist Canadians whose income is impacted by COVID-19. See COVID-19 Updates – Additional Resources section.

If you are worried about keeping up your debt or credit card payments, contact your lender sooner rather than later.

Got questions about your money now that restrictions are being lifted and normalcy is on the horizon? Contact Money Coaches Canada today for a free consultation.

Category(s): For your information, Investing
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