There’s no doubt that the COVID-19 pandemic has presented challenges when it comes to an individual or a business owner’s financial plan. Many people have relied on various government relief programs. It’s more important now than ever before to revisit your plan so that you can make short and long-term adjustments where necessary. Here are some tips to get you started.
Do your homework
- Make sure you understand all the conditions and obligations of any government program that could apply to you. As a business or individual, it’s also important to keep in mind any re-payment conditions.
- Remember to include taxable amounts received from the Canada Emergency Response Benefit (CERB) or other programs in your anticipated income for the year. It’s a good idea to keep record of it now rather than waiting until tax season. As a planning point it is important to know what your taxable income is going to be throghout the year so there are no surprises and you aren't stuck with a big tax bill later.
- Talk to your bank, credit card company, and service providers about any support they may offer.
Details on Government of Canada COVID-19 support programs. Be sure to check often for program updates.
Make a plan
This pandemic has reminded us of the importance of planning. A financial safety net is a crucial element in your wealth plan. While we all hoped COVID-19 would subside with the summer heat, infectious disease experts continue to encourage us to take a more serious, long-term view.
Also, there’s no guarantee on which government support programs will continue or for how long. Many public companies have even stopped providing earnings forecasts because they don’t know what’s next. Consider these tips.
- Adjust your monthly budget: Re-evaluate your monthly budget and understand your priorities. Your income and costs may have changed depending on how you were affected, verify which financial support options are available to you. Private support is any support outside of government support. An example would be the bank willing to defer your mortgage, or a company willing to extend payment terms on your invoice.
- Build up your emergency fund: Ensure you have a financial safety net to cover unexpected but necessary costs like car repairs and medical expenses. You may also want to create an emergency fund to bridge a temporary loss of income. This is so you can continue to pay for non-discretionary expenses, like food and rent.
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Keep saving towards your goals
Maintain your savings habit and discipline and take a long-term financial planning view—even if the amount you can now put aside to invest is less.
- Set up a regular investment plan so that you don’t have to think about it each month.
- As you approach your goals, and get closer to needing your savings, take risk off the table and increase cash reserves.
Talk to an expert
A qualified financial planner can guide you to make the most suitable decisions based on your situation. If you don’t have one, talk to someone at your local bank. They can offer advice on debt management and investment opportunities. For example, you may want to consider:
- Contributing to your TFSA (Tax-Free Savings Account) or your RRSP (Registered Retirement Savings Plan) based on your unique situation.
- Investing in conservative and liquid investments if you think you may need access to funds soon.
- Investing in quality stocks when the market is down, if you have a longer-term time horizon and a higher risk tolerance.
The power of estate planning
- Review your will, powers of attorney, and representative agreements for healthcare.
- Revisit your life insurance if you have a young family or are carrying debt.
Overall, be clear about your priorities, revisit plans, and review your accounts regularly and stay vigilant.
Bryan Sommer, CPA, CA, CFP, CIM, is a Portfolio Manager with CIBC Wood Gundy and holds the Chartered Professional Accountant designation.
“CIBC Private Wealth Management” consists of services provided by CIBC and certain of its subsidiaries, through CIBC Private Banking; CIBC Private Investment Counsel, a division of CIBC Asset Management Inc. (“CAM”); CIBC Trust Corporation; and CIBC Wood Gundy, a division of CIBC World Markets Inc. (“WMI”). CIBC Private Banking provides solutions from CIBC Investor Services Inc. (“ISI”), CAM and credit products. CIBC World Markets Inc. and ISI are both Members of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. CIBC Private Wealth Management services are available to qualified individuals. The CIBC logo and “CIBC Private Wealth Management” are registered trademarks of CIBC. Clients are advised to seek advice regarding their circumstances from their personal tax and legal advisors. Bryan Sommer is an Investment Advisor with CIBC Wood Gundy. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.
This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2020.
1 Per Canada’s COVID-19 Economic Response Plan: Support for Canadians and Businesses, which is available online.
- https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage- subsidy-small-businesses.html
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