Saving was a tricky proposition before the pandemic, and now it’s even tougher. There’s no question that the COVID-19 pandemic is having a real impact on our economy and our pocketbooks. But we Northerner’s aren’t afraid of a challenge.
We know the income of many Northerners has been affected by the pandemic. But on the brighter side, with all the lockdown and social distancing restrictions, there are less things to spend our money on. We aren’t going out for expensive dinners, heading to busy shopping malls or taking that beach vacation down south. So, in some ways, the pandemic is also helping us save.
But even with that somewhat involuntary help, it’s important to plan, budget and save. Not only is it a good overall practice, but we don’t know how long the pandemic will last so it’s important to save money while we can.
Step 1: start an emergency fund.
The pandemic is a great example of why you might need an emergency fund. Many of you are probably using your emergency funds right now to help make ends meet. But if you haven’t created one yet and are still earning a stable income, now’s the time. Typically, you want to save up enough to cover expenses for 3 to 6 months. It can’t be emphasized enough how important it is to have the protection and reassurance that an emergency fund can provide when times are tough.
Step 2: save everything you’re not spending.
This goes hand-in-hand with creating your emergency fund. In fact, a good way to approach this is to take all the money you save and put it towards your emergency fund until it’s topped off. But what’s the best way to save? The answer is: whichever way that works for you.
It can start with all the money you’re not spending due to the lockdown. You may be saving on things like commuting costs, gas, parking, eating at restaurants, going out to the movies and travel. Sock all of that away for a rainy day. And, if you haven’t had to use it yet, try to save your Canada Emergency Response Benefit (CERB) cheque too.
Then, consider depositing a percentage of each pay cheque into your savings account. You could even dump your loose change into a jar at the end of each day to save. The important thing isn’t how you’re savings—it’s that you’re saving.
Step 3: prioritize your spending.
Another great strategy in our pandemic playbook for saving is to prioritize your spending. What we mean by that is spending money on your ‘needs’ first, rather than your ‘wants’. High-importance, priority expenses might include your rent or mortgage payments, car payments, bills, insurance, groceries and childcare.
If you have money left over after spending on your priorities, consider at least cutting back on things that aren’t as important. Ask yourself if you really need whatever you’re about to spend money on. The savings you realize with this approach can go towards your emergency fund, your retirement savings, investments or a simple High-Interest Savings Account. To help you get started, we’ve put together a Budgeting Money Map.
Step 4: plan ahead.
No one knows what the future holds or how long the pandemic will last. With that in mind, it’s best to be careful, reign in your spending and save as much as you can for now. Also, if you know you have significant expenses coming up, start saving for them in advance so they don’t have as big an impact on your pocketbook when they happen.
You can also start thinking about what to do with your savings. Ideally, you want it to grow but the priority is to keep it safe during this turbulent time. A Northern High-Interest Savings Account is one great option. Another is Guaranteed Investment Certificates (GICs), which offer a guaranteed return with no risk to your principal investment.
Whichever route you take, the important thing is to start saving! A Northern Financial Advisor can help you put together a plan that balances your current situation with your goals for the future. Give us a call at 1-866-413-7071 and let’s make it happen!
