Five post-pandemic resolutions for financial health

2022-01-12   minute read

Zaki Alam

Lifestyle Debt

Debt Solutions

The new year is a great time to take stock of our lives and set our intentions for the month ahead. No matter your perspective on resolutions, there’s plenty of intriguing research on the potential for fresh starts to create lasting and meaningful change.

Of course, the past couple of new years just haven’t felt quite the same. It’s been harder to think of things to do or ways to change. Sure, we’ve flipped the calendar, but there are just fewer things to look forward to with the challenges and seemingly endless monotony of the pandemic.

So rather than thinking about what kinds of goals you might set for yourself in 2022, lets instead look forward to this being the year the pandemic hopefully “ends” — and five ways we can financially ready ourselves for life after COVID.

Build your emergency fund

Scientists had been warning about the risk of a global pandemic for years leading up to 2020. Yet global leaders largely ignored their pleas. It had been more than a century since the last major outbreak. The problem seemed like a distant concern — until it wasn’t.

See, the problem with unexpected events is just that: they’re extremely difficult to predict.

We can see sobering parallels between the global response to COVID-19 and our own ability to cope with financial emergencies. We know something bad is inevitably going to happen, but it’s easier to believe things will simply continue going right.

Except the good times never last. One day your car will be running fine. The next morning it will refuse to start. Your career can seem on the upswing, then suddenly local pandemic restrictions forces your employer to lay off half its workforce. And if you’re not prepared, that abrupt reminder can really set you back.

Setting aside six to nine months of living expenses does more than simply help you avoid taking on added debt when costs go up — it gives you time and clarity to plan your next steps. Instead of thinking about how you can minimize the damage, you’re able to make decisions based on what’s in your best interest today for years and months into the future.

Remember, you don’t have to get to your emergency fund target now. Even $1,000 can make a big difference in how your next unexpected expense impacts your bottom line. Focus on getting a head start and setting benchmarks to work toward every month and year until you reach your savings goal.

Streamline your expenses

De-cluttering has become a growing phenomenon in recent years — with millions of people embracing the power of tidying and organizing their homes to clear their minds and create some mental bandwidth.

There’s some evidence that tidying our living and working spaces can indeed reduce our stress and improve our ability to focus, too. But one area that perhaps could use some more attention in this minimalist revolution is our budgets.

It’s been a long time since inflation has been a major concern in Canada, but we’ve seen prices for everything from lumber to lettuce skyrocket during the pandemic. Historically low interest rates have also led to a rather significant upswing in spending and consumer debt since March 2020. Add to that our growing number of subscriptions and the dramatic rise in online shopping, it’s no wonder our budgets seem to be ballooning out of control.

The end of the pandemic will spell the end of some financial challenges, but it will also be the beginning of others. Prices will hopefully stabilize once supply chains get back to normal, but interest rates will likely go up, making debt much less affordable.

Now might be a good time to compare your pre-pandemic bank statements to those over the past couple of years to understand how your spending habits have changed — and what you might want to let go of.

Do you really need cable TV plus four or five subscription services once you start spending more time with friends or at the office? Is another home renovation necessary right now? What memberships have you been hanging onto as you await a return to normal that no longer seem like a priority?

We tend to set a lot of our financial lives on autopilot these days. This can be extremely convenient and ensure we don’t miss any payments. But it also makes it easy for costs to add up.

Set financial priorities

It’s hard to know how the world will look after the pandemic is over. But there at least seems to be consensus our lives will never be the same as they were in 2019.

Maybe you’ve already taken a new job, gotten married, had kids, or moved into a bigger or smaller home. Or perhaps you’ve resolved to retire and enjoy some time abroad once it’s safe to travel again. Whatever you want to do or achieve in the months and years to come, there will be financial impacts. And that means investing some time to re-align your current and future financial priorities.

One helpful exercise may be to sit down in front of a blank sheet of paper and creating a basic T-table. Label one column “current,” and the other “future.” In each, list the five most important things you want to do, achieve, gain, and work toward — then sit and think about how important each of those priorities are to you. Once you’re confident in your answers, rank each item from one to five.

Next, take out another fresh sheet of paper and take a few notes on how your future priorities differ from those past or current. Below that, create a three-column table and label it with your top three future priorities (as below), and list as many actions, changes, and behaviours you can think of that will be necessary to make those objectives a reality.

Pay off debt Get married Buy a house
Stop spending on credit cards and line of credit Create a realistic wedding budget Pay off existing debt
 Budget 10% of every paycheque to debt repayment
 Set up a joint savings account and pre-authorized monthly transfer
 Review credit report and check credit score
Reduce discretionary spending (e.g., food delivery, travel, shopping, etc.) 
Determine a savings deadline and list when payments are due. 
Set down payment saving goal and deadline
 Etc.  Etc. Meet with a broker for pre-approval. 

Being clear on your financial priorities is a critical step in ensuring your habits and behaviours align with your values and you’re working toward your own personal definition of financial wellbeing.

Get out of debt

Consumer debt has been a major talking point throughout the COVID-19 pandemic. We’ve seen growing concern, both from households who have felt the credit crunch due to lockdowns and layoffs and individuals taking advantage of rock bottom interest rates over the past two years.

While the MNP Consumer Debt Index has seen confidence rise and fall since March 2020, it has remained an average of more than six points lower per quarter since the pandemic began (99.9 vs. 96.5) — including three record lows in March 2020, December 2020, and January 2021.

A statistics Canada report in August 2021 did reveal Canadians paid down a collective $16 billion in credit card debts between February 2020 and February 2021. However, while this drop was the most rapid in more than 20 years, it was largely fuelled by business closures and a drop in household expenses. As of January 2021, almost half (45%) of Canadians still report regretting the amount of debt they’ve taken on. While more than two in five (43%) are worried about their current debt level, and nearly a third (31%) say it’s getting harder to pay down their debts.

Debt is a leading source of financial stress and anxiety, but it doesn’t have to be. Taking steps to reduce your debt will not only help alleviate the pandemic’s pressure on your life now, but also reduce your long-term stress and create options and opportunities for you as life returns to normal. It’s also a necessary step to achieve other resolutions such as saving for emergencies and committing to other financial priorities.

Consult with a financial professional

There has been a long-term trend toward people taking progressively more responsibility for their own personal finances. With ATMs, then online and mobile banking, fewer people visit their bank branches anymore — much less sit down with a financial advisor to discuss options and tactics. The convenience and functionality of financial technology apps means even more people are even taking charge of their own taxes and investments, too.

While there are countless benefits of this shift to self-service money management (e.g., lower costs, time saved, better financial literacy, etc.), there are some potential drawbacks, too. Perhaps the biggest being that people seem increasingly hesitant to reach out and ask for help or guidance.

No matter what your post-pandemic resolutions include, consider booking some time with a qualified professional to discuss your goals and opportunities to achieve them faster and more efficiently.

For example, if your goal is to pay down debt, MNP offers Free Confidential Consultations to all consumer debtors in Canada to review your financial situation and discuss options. These sessions are free of cost and you’re under no obligation to participate in any debt solution.

Together with one of our Licensed Insolvency Trustees, you’ll review your financial situation and goals, and identify potential opportunities — from consolidation and credit counseling, to a potential Bankruptcy or Consumer Proposal — for a financial fresh start. We’ll let you know the costs, benefits, and potential drawbacks of each solution so you can make an informed decision on your best path forward.

If your post-pandemic goals are more focused on retirement or building wealth, you may also enquire with your bank about options to review your finances and banking plans. Many institutions also offer free consultations with clients to review your asset and investment mix and options available to you.

Provided there’s no commitment required, these sessions can be extremely informative and may provide the boost you need to take full advantage of your financial reset.

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