As I sit down at my laptop to write this article, I’m listening to the Ontario announcement that the age threshold for the COVID-19 vaccination will be lowered to 18 by the May long weekend.
This is encouraging news indeed and you’re probably looking forward to getting out and spending money.
We’re still managing the pandemic in Ontario so remain vigilant with the recommended health advice from your local health unit.
Since the first dose of the vaccine for these younger individuals should be going into arms by the end of June, it suggests that second shots will be administered around Thanksgiving.
Coincidentally, most of the eligible population in Ontario should be vaccinated before Christmas.
As if the end, or at least the beginning of the end, of the pandemic wouldn’t be incentive enough to spend, the combination with the Christmas season could be an invitation to hyper-spend!
Stop Spending Money: Avoiding the Temptation to Spend Post-Pandemic
The period between now and the second shot therefore provides an ideal time to make sure that when the time comes to spend, you can do so responsibly without compromising key aspects of your financial plan.
When assessing your financial plan now, you need to apply the “Covid filter”: not only to see how it did through the pandemic, but also whether the Covid-19 experience indicates that changes should be made.
Consider the following points:
- Building Up Emergency Funds
- Tackling Debt
- Make Spending Systematic
Building Up Emergency Funds
Before Covid-19 spread through the world, the rule of thumb was to have an emergency fund of three to six months of income in a high daily interest account, or a cashable GIC. For those who experienced no—or little—loss of income during the pandemic, that may still be a useful target.
Due to the pandemic, reduced employment or lost jobs for many people lasted well over six months, suggesting that lengthening the end of the suggested range would be prudent.
I would say pushing six months to nine is a good first step.
The bottom line: before spending, ensure your emergency fund is prepared to deal with a post-Covid world. What amount of time is enough for you to weather the next storm?
Plague and Planning: 4 Financial Planning Considerations of the Covid-19 Pandemic
Tackling Debt
I’m sure you’ve noticed that there are two kinds of debt: good debt and bad debt!
Good Debt
Good debt is typically used for the purchase of appreciating assets (things that typically increase in value over time)—your mortgage being a prime example.
Bad Debt
Bad debt is usually credit card debt that is taken on for things like discretionary spending: the urge to take that first post-pandemic trip will be overwhelming, but running up your credit card debt to pay for it would be unwise.
For those who have been aggressively paying down credit card and other debts during the pandemic, redirecting some of those extra payments towards some post-pandemic pleasures would be a well-earned reward—without throwing your financial plan off the rails.
If the end of the pandemic means an increase to—or return of—income, I encourage you to consider whether any of that additional income could be redirected to pay off some of your credit card debt or even some good debt before it’s simply spent.
Any repayments now will put you in a better place to be able to deal with future bumps in the road.
Budgeting for Retirement: It May Be Even More Important
Make Spending Systematic
One of the best ways to reduce the temptation to spend unnecessarily is to set up your savings systematically, through pre-authorized contributions.
It doesn’t matter whether this is to build up emergency or longer-term savings: making your savings systematic means that they become routine and part of your budget. When the time comes to responsibly enjoy those savings, it will be further motivation to keep the contributions in place.
How is your post-Covid plan shaping up? Spending some time virtually or over the phone with your Scrivens financial advisor is a great way to check.
How to Stop Spending Money on Unnecessary Things
Many people start off a new year with the resolution of “spending less money” without a plan in place. It’s really hard to achieve this without knowing your current spending habits and finding ways to cut back.
Here are a few ways you can stop spending money on things you don’t need:
- Unsubscribe from shopping emails. Just because something is on sale, doesn’t mean it’s a good deal and you need it. Remove the temptation by unsubscribing.
- Rewarding yourself with a treat. Rewarding yourself is a really great way to encourage positive behaviour, like spending. But, there are ways of rewarding yourself without spending money.
- Save the raise. When you receive a raise or bonus, fight the urge to spend it right away and pay down your highest-interest debt.
- Find ways to replace high-frequency purchases. If you buy a coffee every day at your favourite coffee shop, consider investing in a single-serve coffee machine at home. You’ll still feel like you’re treating yourself but at half the cost. Even better, if you can suffer with drip-coffee, it’s significantly less expensive.
- Sell your car. Cars are well-known for their high cost of ownership and with working remotely becoming more popular, do you really need a car?
- FOMO. Everyone has it so I need it too. This is very common and partially why Apple products are so popular. Its hive mentality encourages users to stay in their technology ecosystem. The higher-end mobile phones often require higher monthly plans on top of their high price tag. Consider opting for a cheaper model and compare the monthly costs.
- Remove subscriptions. How many streaming services are you subscribed to? Try slimming it down to just one and try to find content that you wouldn’t normally watch. Similarly, Amazon Prime makes shopping so easy and “free shipping” encourages you to easily “Add to cart” items that you don’t really need.
- Special occasions. When restrictions are lifted, there is sure to be an influx of weddings and other special events. You’ll have an urge to buy new outfits for every wedding. If you really don’t have anything to wear, consider setting a budget and find items that can be repurposed in creative ways.
- Use a budget. The idea of not spending money isn’t meant to not have fun. By using a budget, you can allocate monthly spending allowances that include entertainment and fun. Just keep an eye on your monthly spending and make adjustments as you notice your habits and life changes.
Finding ways to stop spending money will take patience and sacrifice. I don’t recommend you do everything at once, simply start with one way to stop spending money and once you have that routine in place, add another.
Working with a financial planner can help you identify areas you can stop spending money and begin saving for your future. Speak with a Scrivens financial advisor today.
