Well, we’re officially approaching month three of the COVID-19 pandemic. That’s three months of job losses, reduced income and countless changes to life as we know it. Maybe you’ve been laid off and are getting by with government support. Maybe your business revenue has dropped significantly and you’re struggling to stay afloat. You’re probably wondering how to manage your finances so you can weather the storm and bounce back when we reach a “new normal.”
No matter how you’ve been affected by the current health crisis, the importance of financial planning is clearer than ever. As Vancouver’s financial planners, the team at Prometheus Private Advisory Group is here to help you navigate these uncertain times. The key to financial planning during a crisis is to act as soon as possible to plan ahead for your future. If you’re not sure where to start, here’s a guide to managing your finances during a pandemic.
1. Create a Budget
First, you need to know what you’re working with. Start by assessing your current financial situation — including income, assets and available savings — and then work backwards to see what you can reasonably afford each month. Since we’re in a state of crisis, this may mean tapping into lines of credit or savings accounts, but be careful not to overextend yourself. You don’t want to rob Future You to pay Present You, if you can avoid it.
We don’t know how long the pandemic will last, or how long it will take for businesses to bounce back. Be cautious and create a sustainable budget that will carry you through at least six months. If it looks like things are going to take longer to rebound, reassess your budget as needed.
2. Start Small and Make Cutbacks
Once you have your budget in place, it’s time to figure out where your money is going. Calculate your fixed expenses — such as rent or mortgage payments, and cable or phone bills — to see what’s essential and what you can give up. Obviously, you’ll have bills that need to be paid, so those have to stay (bummer, right?). There are also certain comforts that you should absolutely hang on to. You’re human, after all, and you deserve your little pleasures … within reason. But chances are there are ways you can trim down your expenses to make sure you’re staying within budget.
3. Defer Your Mortgage or Credit Card Payments
Speaking of fixed expenses, there’s good news. Canada’s big banks (and many private lenders) are allowing credit card and mortgage payment deferrals to help people manage cash flow during COVID-19. This can really help to free up space in your monthly budget. A word of caution, though: this doesn’t mean those payments are cancelled. It simply pushes them off to a later date so you can focus your current finances on more urgent things.
4. Set a Long-Term Plan for the Future
Once you’ve established a short-term plan to get you through our present reality, it’s important to think ahead to the future. What if something like this happens again — will you be prepared? Because let’s face it, there will be a next time so you might as well start planning now. Making smart decisions with your money today can give you peace of mind should any unexpected situations come up down the line.
If you’ve got extra cash, this is the time to consider investing so you can build up your assets. If you have life insurance (which you should), find out if there’s built-in cash value. If you don’t have life insurance, get some! Life insurance can be a valuable financial planning tool to set yourself and your family up for long-term financial health. Ask us how.
5. Tap into Your Line of Credit
Lines of credit can be extremely helpful during uncertain times when your bank account isn’t feeling as flush as usual. You can use the funds to pay for immediate expenses or unexpected costs. Your Vancouver financial advisor can help you assess your financial situation and create a solid plan for how to pay the money back when life returns to (some kind of) normal. Homeowners, you could also consider tapping into your home equity line of credit. It’s a flexible way to access cash if and when you need it.
Unfortunately, there’s no playbook for financial planning during a pandemic. But we hope these tips will help you make smart decisions with your money so you can come out strong on the other side. As we always say at Prometheus Private Advisory Group, the key to financial stability is to start now. The sooner you start managing your finances wisely, the better off you’ll be — no matter what life throws at you.