Up until five months ago, my financial plan was clear and had a long-term horizon: contribute as much of our household income into RRSPs and TFSA as possible, invest our savings to create additional streams of income in later life, and eliminate student and consumer debt as quickly as possible.
One day in mid-March, my world changed in a matter of hours. And in some important ways, so did my financial plan.
Here’s what happened.
My wife Lina and my adult step-children, Ally and Evan, were all employed by a local breakfast restaurant. In the early morning of March 16th, Lina and Evan left to work their scheduled shifts at the restaurant, as they normally do. Not scheduled to work that day, Ally woke to her morning ritual. And I was at the office before market opening.
At 11 am, my wife called to let me know that the restaurant was closing until further notice. This was due to swift and immediate government regulations put in place to control the spread of COVID-19.
My wife, son and daughter were all instantly unemployed, and I was now the sole income earner in the family.
I was and remain grateful to be a part of an industry deemed to be essential, which meant that I could continue doing what I loved: helping our clients manage their finances and investments. But at the same time, most of my family lost their income, ability to contribute to our collective livelihood, and general sense of purposefulness.
They were all grieving, and by extension, so was I.
At the time, we didn’t know what government support, if any, would come to those who lost their jobs.
Lina and I worried about the impact of her loss of income. We were also concerned about how Ally and Evan were impacted.
In that first week, my family and I talked every night after dinner to lay out a financial plan that mirrored our current situation. It was simple, decisive, and included three steps.
- Create a budget that eliminated ALL discretionary expenses.
- Review our “rainy day” fund.
- Envision how each of us was going to contribute to our family’s wellbeing.
Let’s dive into that more…
1. Our family budget
Overnight, our combined income (mine and Lina’s) was reduced by 31%, which meant that our expenditures had to be reduced by at least that much, if not more.
It never occurred to us that we would not pay for, or defer, our essential bills: rent, utilities, phone, internet, car lease, and groceries. Those expenses became our only priorities.
It was also very important that we maintained our current savings strategy (monthly automated contributions to RRSPs and TFSA) and that we paid off all existing credit card debt balances immediately.
All other expenses were decidedly slashed: ordering take-out, buying alcohol, shopping online, paying for subscriptions, and so on. My gym membership was placed on hold indefinitely, and I cancelled all my weightlifting sessions with my trainer. We even managed to use my family’s newfound time to clear out a storage unit, so we could eliminate the monthly lease.
Before COVID, Ally and Evan were contributing to household expenses, like paying rent and buying groceries. Thankfully, they were already living at home, so their ability to pay rent was not an issue. But they had mobile phone expenses and other subscription commitments.
Both kids were taught one of the main tenets of financial planning, which is to save at least 10% of their monthly income. They would now have to dip into their savings to pay their phone bills and help out with groceries. To ensure that they were not depleting their savings too quickly, they both suspended all their online subscriptions.
2. Our “rainy day” fund
In addition to RRSP and TFSA contributions, Lina and I had always put aside cash for a rainy day. Part of our financial plan was to have at least six months’ worth of rent available.
When we reviewed our rainy day fund, we were so grateful to find that by slashing all of our discretionary expenses, we would not have to dip into it to pay for our prioritized bills. We did use a small portion of the fund to pay off an existing credit card balance. Otherwise, the fund would remain intact. This was a great relief, as it meant our family could live on a single source of income.
Once the Canadian Emergency Response Benefit (CERB) kicked in for Lina and both kids, we saved as much of the funds as possible, since we did not know how long their furlough would last.
3. A new daily life plan
Before COVID, each member of our family had a vision about how to build a life that was financially independent, purposeful, and made up of activities we are passionate about. That included travel, eating out, cooking, film, art and physical training.
The pandemic dimmed those visions significantly and quickly. But it didn’t change our commitment to living a positive and purposeful life.
Every Thursday night, we make a plan for all our meals the following week. Ally and Evan spend hours in preparation for the evening discussion, finding nutritious, simple recipes on Pinterest and in our own cookbooks. Lina then shops for all our groceries while Evan cooks almost all of our meals and Ally stays busy with online writing courses. I have continued my workouts at home using free weights.
Life during COVID has been stressful, but we have been kept afloat by the strength of our financial planning skills and our own resilience in the face of crisis.
Our ability to make ends meet on a single source of income has led me to reflect on my spending habits and how my financial plan will change in our post-COVID life. Stay tuned for my next blog.
Never Retire Profile of the Week
David Suzuki
Canada’s most famous environmentalist once said, “We’re in a giant car heading towards a brick wall and everyone’s arguing over where they’re going to sit.” David Suzuki was objecting to the social and political wrangling that distracts from a fundamental and chilling fact: if we don’t find viable climate solutions, preserve biodiversity, protect our oceans and make our cities healthier, we are heading toward disaster. Born in 1936, Suzuki is best known as host of the CBC science program, The Nature of Things and for his vocal criticism of governments for their lack of action in protecting the environment. A scientist, broadcaster, author and activist—and survivor of internment by the Canadian Government during the Second World War—he established the David Suzuki Foundation in 1990 and became a Companion of the Order of Canada in 2006. Known for his passion and eloquence, Suzuki also believes in the power of positive change: “The human brain now holds the key to our future. We have to recall the image of the planet from outer space: a single entity in which air, water, and continents are interconnected. That is our home.”
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