Financial decision-making during uncertain times: Tips to keep in mind while making money decisions
People have a lot of questions these days: When will life return to normal? Will there ever be a “normal” again? When will I be able to gather with large groups of friends and family? And how do I make smart decisions about my money? In uncertain times, it can be really hard to know the best strategies to protect your money, especially if you’ve recently arrived in Canada.
While everyone’s situation is different, making smart decisions about preserving, borrowing, investing and spending your money is a matter of returning to some financial basics. And as November marks the 10th anniversary of Financial Literacy Month in Canada, the timing couldn’t be better.
Here are five key steps to keep in mind while making money decisions today.
1. Don’t panic: The COVID-19 pandemic has caused a great deal of fear and anxiety, especially when it comes to our health and our money. Making decisions from a position of fear, however, won’t serve us in the long run. Our ability to see the future effects of our financial decisions can become clouded by panic.
While times are unsettled right now, and you may feel like you’ve got to do ‘something,’ it’s wise to take a breath, review all your financial options, and consider how any action you take today may affect your long-term goals and priorities.
2. Look closely at your budget: If money is tight right now, see if you can find areas within your budget that can be adjusted to give you some breathing room. Are there subscriptions or memberships you might pause for the time being? Can you trim some extras that aren’t important to you right now? Also, think about whether you’re making any pre-authorized contributions to an investment, or if you’re on an accelerated mortgage payment plan. While these are smart financial decisions when your cash flow is stable, if you’re in the middle of a crunch, taking a break from these additional outlays could give you the relief you need today.
3. Understand your cost of borrowing: If you’ve had to rely on credit to get you through a dip in income, you’re not alone. But if you’re having a hard time paying down your balances, your interest costs may be creeping up — and if that’s the case, it may be time to evaluate how much credit is costing you and look at other options.
Consider credit options that may be cheaper than what you’re currently using. A line of credit, for instance, comes with an interest rate that is considerably lower than a credit card. A consolidation loan, meanwhile, can help you simplify, manage and reduce the carrying costs of your overall debt.
4. Talk to an advisor: It’s easier than ever to connect with a financial advisor wherever you feel most comfortable as most major banks can provide advice online, over the phone or in person – and with no obligation. An advisor can offer a second opinion on the decisions you’re thinking of making, and show you opportunities to save in your day-to-day life. At the same time, they can help you meet your long-term goals and balance both your present and future needs by looking at your complete financial picture.
Just remember, you don’t need to make financial decisions alone. Advisors are here to help you make the most of your money, and guide you through the options that make the most sense for you. Answers to your money questions, big and small, especially in these uncertain times, will provide you with a better picture of where you are today, and a plan for your tomorrow.
By Amit Brahme. Written in collaboration with Diane Amato, a Toronto-based freelance writer covering finances, travel and technology.