Preparing finances for second wave.
What to do now to prepare financially for a second wave of COVID-19
HALIFAX — When COVID19 began impacting the East Coast earlier this year, many people took a financial hit as unexpected job losses and reduced business combined with mounting bills. With concern a second wave — with the potential to cause a second lockdown period — could be coming, personal finances may be further impacted.
Because there may be some forewarning this time, there are some actions people can take today to help us tomorrow.
“COVID-19 has taught us that things can change quickly and that we should be looking for ways to insulate ourselves from shock,” said Troy Gorrill with Investia Financial Services/ Focused Financial Planning, based in Charlottetown, P.E.I.
Although COVID-19 is the largest disruptor to society, said Gorrill, individuals have always been at financial risk. Now is a great time to review your financial goals over the short- and long-term.
For those who currently are investing, it may be time to revisit your goals, suggests Gorrill. Consider whether you are on target or if adjustments are needed, he recommends.
Gorrill said it's important to remember to focus on your plan rather than the recent financial market turmoil. History shows us that markets usually rebound from lows and volatility can help improve returns, he adds.
Catherine Metzger-Silver, a financial adviser with Edward Jones in Kentville, agrees. It's time in the market, not market timing.
Some investors think they can succeed at market timing — buying when the price is low and selling when the price is high. This would indeed be a good strategy if they could predict highs and lows, said Metzger-Silver, but no one can accurately forecast these peaks and valleys. Instead of ducking in and out of the market in an attempt to catch the highs and lows, simply stay invested.
“The more time you spend in the market, the lesser the impact you're likely to feel from short-term price swings,” she said.
And if you're always invested, you'll always be in a position to benefit from the next market rally, she adds.
BACK TO BASICS
For those starting out and for some seasoned investors, Gorrill said to start with the basics.
“Just like we are to have an emergency kit at home with several days' worth of supplies, do you have an emergency fund set aside?” he said.
Typically, it's recommended to have three months of income set aside, but even if that is not feasible, start with a smaller goal, he said, and work towards a point where family finances will be OK should the unexpected occur.
Finally, Gorrill said not to forget to review what's protecting you and your family through insurance. If you don't remember what you have, talk to your insurance adviser to review what you're covered for and for how much.
Even if individuals do not have the financial capacity at the time to invest in the market or save several months worth of income, Gorrill said, there are other things that can help financially in case of a second lockdown. For some, ensuring that you have an unused line of credit as a last resort can be useful in your planning, he said.
HELPFUL TRENDS
Gorrill says he has been amazed and encouraged by some of the trends that have been happening since the first quarantine period, like people who have started to prepare their meals and grow their own food.
These ideas are not just for those who are low income, said Gorrill. Those who have a higher income that many would think are OK may have struggled before COVID-19, and the pandemic just added to their problems.
“Budgets are not fun and that's why most of us fail,” said Gorrill.
Instead, look at cash flow and determine a budget by being brutally honest with yourself, he said. Keep a notebook and write down everything that you spend money on. And, yes, include the $2 for coffee.
Next, Gorrill said to look at your fixed and variable costs and your needs and wants.
“By making a list we can see what we must spend on, such as rent, but we can examine our variable costs, too,” he said.
Look at whether you need all the features of your cellphone plan or whether you use your cable package. Evaluate how much you're spending on things like ready-made foods and takeout.
“COVID-19 and the shut down has given us a chance to learn and grow if we want,” said Gorrill. “By doing small things like making your lunch, making coffee at home, growing a garden, or taking the time to cook, you will not only save money but create family experiences.”
ECONOMIC RECOVERY
When it comes to predicting the future of the market if there is a second lockdown phase, Metzger-Silver thinks the economy will begin to recover in the second part of this year.
According to Nela Richardson, principal investment strategist at Edward Jones, as long as new cases stay localized, sporadic and contained, it is unlikely the U.S. will reenact a national lockdown.
The path of the pandemic, however, will shape the pace of the economic recovery, she said.
“After a quick bounce in growth during the third quarter, we expect the recovery back to pre-pandemic levels of economic activity will be slower due to the choppy reopening process while awaiting a vaccine,” said Metzger-Silver.
The U.S. housing market is showing itself to be a bright spot in the economy, said Metzger-Silver. After stalling earlier this year as stayat-home orders were put in place nationally, record-low mortgage rates have lured homebuyers back into the market. Housing, as one of the most interest rate-sensitive sectors of the economy, is an important watchpoint for markets, serving as both a current indicator of consumer health and a leading indicator of economic recovery, she said.
“In the absence of a widespread vaccine, we expect the economic recovery to continue, but for the rebound to be uneven,” said MetzgerSilver.
"The important thing to note is that we don't know when, but we do know that this too shall pass.
“Investors should continue to have communication with their financial adviser if they have questions or concerns, but keep in mind that while caused by an unprecedented event, it is normal for the markets to ebb and flow,” she said.
Emotions are running high as we all navigate through these times; but it's important to stay collected and not give in to the panic that is created by the all of the news and information that is coming at us so quickly, warns Metzger-Silver.
“The actions investors can take is to keep their sights on their long-term financial goals, look past short-term downturns and maintain the discipline to keep investing in all types of markets,” she said.
“A very wise person once said to me, who's more important? Today Troy and Troy's today family or Future Troy and Future Troy's family? If it's always today, we will never prepare, but if we think about our future self and family, work with a professional, we can be a better off tomorrow,” said Gorrill.