Be Cautious about Adjusting your Spending back to Pre-COVID Levels
As we begin to emerge from the lockdown of the past couple of months, there is a broader need for people to spend money right now in order to get the economy up and running, again. To put it simply, for an economy to function effectively and for people to get back to working, consumers need to spend.
However, before you go and spend all the extra money you may have saved during the lockdown, we want to give you a couple of suggestions to help you navigate this period.
Separate your savings
If you have been fortunate to have saved some extra money over the past few months, it could be a good idea to put 50-75% of this extra money immediately into your savings. The remainder you could spend, if need be, while you adjust to the ‘new normal’.
Although it seems that things are getting back to normal with many businesses, thankfully, reopening and people going back to work, there is still a strong possibility that a recession could be on the horizon. If this were to happen, you’ll be thankful that you put some of that extra money into your ‘rainy day’ fund.
The stock market has been booming since it corrected in mid-March. Although the near future in the economy is somewhat uncertain and markets are volatile, if you have some extra money that you will not need for 8 to 10 years, then investing could be a good option for you. Investing for the long term is always a good idea if you are in the position to do so because, even if the market dips (which it often does), you have a long enough period of time to recover those losses. Experts like Warren Buffett always advise this long-term outlook, along with having a well-diversified portfolio like a fund that tracks a leading index.
As mentioned, there is a possibility of a recession which would cause the markets to dip, but there is also the possibility that a vaccine will allow everything to go back to normal. In short, don’t try and time the market and always have a long-term outlook when investing.
As businesses reopen, many are looking to stimulate spending and ramp up their sales as quickly as possible. Because of this, there are some great sales out there. You may be lucky to be in a very secure job and, as a result, feel confident about adjusting your spending back to pre-pandemic levels. If this is the case, then now could be the perfect time for you to buy some items that you had been planning to at some point since you could get large discounts and great value for money.
Overall, evaluate all your options and decide what is best for your personal situation. There is a need for Canadians to start spending, again, to kickstart the economy so, when you’re out and about, maybe think about supporting your favourite small businesses.
This is a great opportunity to set your finances up so you won’t need to worry financially, if there is another wave of COVID-19. We never know exactly what is going to happen, but it is always a good idea to be prepared!
If you have any questions or wish to talk to an advisor, please reach out to me, Brian Moylett, at firstname.lastname@example.org, or call/text at 778-951-2806.
Subscribe to our free Blog
The best advice on retirement, investments and personal finance delivered right to your inbox.