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Financial future: What can you do now to prepare for a second wave of COVID-19?

Understanding the value of money in more than a financial sense could be the key to forming new behaviours around saving and spending.
-SaltWire file photo

When COVID-19 began impacting the East Coast earlier this year, many people took a financial hit as unexpected job losses and reduced business combined with mounting bills. With concern a second wave – with the potential to cause a second lockdown period - could be coming, personal finances may be further impacted.

Because there may be some forewarning this time, there are some actions people can take today to help us tomorrow.

“COVID-19 has taught us that things can change quickly and that we should be looking for ways to insulate ourselves from shock,” says Troy Gorrill with Investia Financial Services / Focused Financial Planning based in Charlottetown, P.E.I.

Although COVID-19 is the largest disruptor to society, says Gorrill, individuals have always been at financial risk. Now is a great time to review your financial goals over the short- and long-term.

Troy Gorrill with Investia Financial Services / Focused Financial Planning based in Charlottetown, P.E.I. says to think about your future self and family when it comes to financial planning. By working with a professional and thinking ahead, we can be better off tomorrow.  - SaltWire Network
Troy Gorrill with Investia Financial Services / Focused Financial Planning based in Charlottetown, P.E.I. says to think about your future self and family when it comes to financial planning. By working with a professional and thinking ahead, we can be better off tomorrow. - SaltWire Network

 

For those who currently are investing, it may be time to revisit your goals, suggests Gorrill. Consider whether you on target or if adjustments are needed, he recommends.

Gorrill says it’s important to remember to focus on your plan rather than the recent financial market turmoil. History shows us that markets usually rebound from lows and volatility can help improve returns, he adds.

Catherine Metzger-Silver, a financial advisor with Edward Jones, in Kentville, N.S. agrees. It’s time in the market, not market timing.

Some investors think they can succeed at market timing - buying when the price is low and selling when the price is high. This would indeed be a good strategy if they could predict highs and lows, says Metzger-Silver, but no one can accurately forecast these peaks and valleys, though.

Instead of ducking in and out of the market in an attempt to catch the highs and lows, simply stay invested.

“The more time you spend in the market, the lesser the impact you’re likely to feel from short-term price swings,” she says.

And if you’re always invested, you’ll always be in a position to benefit from the next market rally, she adds.

Catherine Metzger-Silver, a financial advisor with Edward Jones in Kentville, N.S., says it's important to stay collected and not give in to the panic that is created by all of the news and information that is coming at us so quickly when making financial decisions.  - SaltWire Network
Catherine Metzger-Silver, a financial advisor with Edward Jones in Kentville, N.S., says it's important to stay collected and not give in to the panic that is created by all of the news and information that is coming at us so quickly when making financial decisions. - SaltWire Network

 

Back to basics

For those starting out and for some seasoned investors, Gorrill says to start with the basics.

“Just like we are to have an emergency kit at home with several days’ worth of supplies, do you have an emergency fund set aside?” he says.

Typically, it’s recommended to have three months of income set aside, but even if that is not feasible, start with a smaller goal, he says, and work towards a point where family finances will be OK should the unexpected occur.

Finally, Gorrill says not to forget to review what's protecting you and your family through insurance. If you don't remember what you have, talk to your insurance advisor to review what you're covered and for how much.

Even if individuals do not have the financial capacity at the time to invest in the market or save several months worth of income, Gorrill says there are other things that can help financially in case of a second lockdown. For some, ensuring that you have an unused line of credit as a last resort can be useful in your planning, he says.

Helpful trends

Gorrill says he has been amazed and encouraged by some of the trends that have been happening since the first quarantine period, like people who have started to prepare their meals and grow their own food.

These ideas are not just for those who are low income, says Gorrill. Those who have a higher income that many would think are OK may have struggled before COVID-19, and the pandemic just added to their problems.

“Budgets are not fun and that's why most of us fail,” says Gorrill.

Instead, look at cash flow and determine a budget by being brutally honest with yourself, he says. Keep a notebook and write down everything that you spend money on. And, yes, he says to include the $2 for coffee.

Next, Gorrill says to look at your fixed and variable costs and what your needs and wants are.

“By making a list we can see what we must spend on, such as rent, but we can examine our variable costs, too,” he says.

Look at whether you need all the features of your cell phone plan or whether you use your cable package. Evaluate how much you’re spending on things like ready-made foods and take-out.

“COVID-19 and the shut down has given us a chance to learn and grow if we want,” says Gorrill. “By doing small things like making your lunch, making coffee at home, growing a garden, or taking the time to cook, you will not only save money but create family experiences.”

Economic recovery

When it comes to predicting the future of the market if there is a second lockdown phase, Metzger-Silver thinks the economy will begin to recover in the second part of this year.

According to Nela Richardson, principal investment strategist at Edward Jones, as long as new cases stay localized, sporadic and contained, it is unlikely that the U.S. will re-enact a national lockdown. The path of the pandemic, however, will shape the pace of the economic recovery, she says.

“After a quick bounce in growth during the third quarter, we expect the recovery back to pre-pandemic levels of economic activity will be slower due to the choppy reopening process while awaiting a vaccine,” says Metzger-Silver.

The U.S. housing market is showing itself to be a bright spot in the economy, says Metzger-Silver. After stalling earlier this year as stay-at-home orders were put in place nationally, record-low mortgage rates have lured homebuyers back into the market. Housing, as one of the most interest rate-sensitive sectors of the economy, is an important watchpoint for markets, serving as both a current indicator of consumer health and a leading indicator of economic recovery, she says.

“In the absence of a widespread vaccine, we expect the economic recovery to continue, but for the rebound to be uneven,” says Metzger-Silver.

The important thing to note is that we don't know when, but we do know that this too shall pass, Metzger-Silver says.

“Investors should continue to have communication with their financial advisor if they have questions or concerns, but keep in mind that while caused by an unprecedented event, it is normal for the markets to ebb and flow,” she says.

Emotions are running high as we all navigate through these times; but it's important to stay collected and not give in to the panic that is created by the all of the news and information that is coming at us so quickly, warns Metzger-Silver.

“The actions investors can take is to keep their sights on their long-term financial goals, look past short-term downturns and maintain the discipline to keep investing in all types of markets,” she says.

“A very wise person once said to me, who's more important? Today Troy and Troy's today family or Future Troy and Future Troy's family? If it's always today, we will never prepare, but if we think about our future self and family, work with a professional, we can be a better off tomorrow,” says Gorrill.

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