Spending and saving in the age of COVID-19
It’s clear by now that COVID-19 has made an impact on where we’re putting our money. Take how social distancing measures have kept us away from family vacations and our favourite restaurants, while economic opportunities have become uncertain for many since the outbreak. But despite unprecedented financial hardships, Canadians are adapting to the new normal by learning how to spend and save during the age of COVID-19, even bringing nationwide consumer debt balances down for the first time in over a decade this past spring.
While some Canadians are curbing credit card overspending, others are rethinking their financial situation by transforming vacation funds into home renovations, or looking towards the future by investing in a diverse portfolio. Brought to you in partnership with Fidelity Investments, we’ve gathered a few of our favourite tips on where to spend, when to save, and how to make this unique, though admittedly challenging moment work best for you financially.
Prioritize a savings account/emergency fund
What are you currently doing with your money after you cover your monthly living expenses and food costs? While there’s nothing wrong with treating yourself, there’s also value in storing savings as a long-term plan. Whether it’s building savings for major purchases, or an emergency nest-egg for financially precarious times like these, consider opening a new savings account— one to keep separate from what you use to cover regular expenses. The cash you stash there remains off-limits, as much as possible. And if you’re sufficiently confident that you won’t need to dip into those funds, put them into an RSP, ideally for better returns and less tax exposure.
Pay down your debt
If you’ve been limiting outdoor shopping trips to getting your grocery essentials every couple of weeks, you’ve no doubt been tempted to shop online. Many Canadians have been feeling the same way, so much so that e-commerce sales have actually soared this year. On the other hand, the change of pace of life under COVID-19 has also given us plenty of time to consider what we already owe. In the past you may have been happy with hitting your credit card’s monthly minimums, but as income streams are tightening, this might be the right time to refocus your budget. Whether you’re sifting through a box of receipts or looking at your credit card statement online, figure out the areas where you’ve spent the most money over the last year, and why. You might not even realize how much you’ve been dropping on clothes online, for instance. COVID-19 may have us rethinking our spending habits, but the message here is evergreen: It’s never too late to cut down on non-essential spending to start paying down your debt load.
Home Renovations
Between Zoom work meetings from the kitchen and around-the-clock family activities, we’re spending more time at home than ever before. This also means we’re now keenly aware of all those little imperfections around the house. If your vacation plans are on indefinite hold, considering re-directing that money into sprucing up your home, sweet home.
Even if you’re looking to hang onto your home for years to come, consider renovations that can offer a high return-on-investment, if your plans ever change-- think a fresh coat of paint, roof and gutter upgrades, or a kitchen reno centred around a high quality quartz countertop. No matter how you go about it, even the smallest renovation can brighten up your outlook.
Can you defer any payments?
Keeping on top of all of our living expenses when income begins to slow can be a significant stressor. If you’re worried about making your next mortgage payment, there’s a chance your creditor can offer some temporary relief through payment deferrals. Seeking a temporary mortgage deferral can help offset stress, but don’t forget that this doesn’t erase the amount you owe. Interest rates will likewise continue to be added to the outstanding principal of your mortgage, but the immediate relief gives homeowners more time to strategize their eventual repayment.
Cancel your less-used subscriptions and memberships
We all need entertainment to help us unwind, but the volume of streaming services out there has become overwhelming—not to mention, each additional account takes another dent out of our income. If you’ve got multiple services on the go, consider trimming them down to the account you generally turn to for your latest binge. In times like these, even saving $10 a month can make a difference.
Claim Benefits
While some of us have been able to work from home, many have had their employment opportunities interrupted by the on-set of COVID-19. If your job has been affected by the outbreak, you’re entitled to apply for temporary income support. While the Canadian government assisted millions through the recently concluded CERB program, those still looking for support can apply for traditional EI, as well as the newly instated Canada Recovery Benefit for the self-employed, the Canada Recovery Sickness Benefit for those who became sick or needed to self-isolate because of COVID-19, and the Canada Recovery Caregiving Benefit.
Invest in your future
A strong financial plan concentrates on immediate expenses, while also investing in the future. Exchange-traded Funds include growth-oriented funds which offer you the control to invest in what you believe in—whether it’s the Canadian, or Global markets. ETF fees are lower than traditional mutual funds, and unlike mutual funds, there is no minimum investment. Your contributions are made on your terms. Fidelity Investments Canada offers a wide selection of ETFs that can help you achieve your financial goals. Learn more at Fidelity's Investing 101 resource centre.
