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Managing your money during uncertain times

Most of us will be financially impacted by COVID-19. The challenges and uncertainties created by the pandemic mean that making the right financial decisions, a complicated task even at the best of times, is currently even more difficult.

We’re here to help with expert recommendations on what to do with your money right now and how to prepare your finances to weather the storm.

Investments

In the past 2 weeks, equity markets have taken a tumble, putting an end to a historic bull market. As of March 23, the TSX (Canada) and the S&P 500 (United States) were down 37% and 34% respectively from their peaks a little over a month ago. 

Perhaps you’ve seen your portfolio diminish as a result, and you’re wondering if it’s time to cut and run. While these concerns about your investments are understandable, our best advice to you is to keep calm and stay the course.

Stay the Course

We recommend leaving your money in your investment accounts if you can afford to do so. In a cash crunch, you can always access your money if you need it using Mylo’s next-day withdrawal feature, but wherever possible, we suggest using emergency savings and reducing unnecessary expenses before tapping into your investments.

Ultimately, history has shown us that over time, the equity markets should recover and grow. Withdrawing your money now locks in any short-term losses and prevents you from benefiting from any future gains when the market recovers.

If you have short-term goals with Mylo, like going on a trip, your money is likely invested in a Conservative portfolio, which means that you have very low exposure to equity markets and are much less likely to be significantly impacted by market volatility.

If you have long-term goals, like saving for retirement or for a young child’s college education, then you have time to ride out short-term market fluctuations.

However, if you feel that your current portfolio does not accurately reflect your risk tolerance or current financial situation, we’re always available to you. Your dedicated Portfolio Manager will be happy to review it with you or answer any questions.

You can also refer to our previous article about this here.

The Road Forward

We recommend continuing to regularly save and invest towards your financial goals if you can. 

By contributing to your savings goals on a weekly basis, you’re taking advantage of an important concept called Dollar Cost Averaging. Basically, buying into your portfolio gradually and consistently minimizes the impact of market volatility.  

Mylo portfolios are balanced weekly. We tend to buy stocks less when the market is outperforming and more when it’s underperforming, which means that your portfolio is taking advantage of the market conditions at different points in time.

Don’t forget that you can always edit the funding rules for your goals in the Mylo app, depending on your cash flow needs and spending patterns. Since most of us will be self-isolating for a  while, we might see our roundup contributions decrease. We suggest setting up or increasing your recurring deposits to stay on track with your goals. Of course, you can also reduce your contributions if your financial situation requires it. 

Moving the Goal Post?

It’s never a bad time to be investing towards your future financial goals, but it’s understandable if saving for things like a vacation or a new car is suddenly less of a priority.

Regardless of changes you may be making to your financial goals, we think everyone should have an emergency fund to help weather any unexpected financial situations without going into debt. If you don’t already have one, make sure that an emergency fund goal is at the top of your list.

If you do have an emergency fund, whether it’s in a Mylo account or somewhere else, don’t be afraid to rely on it if you’re experiencing a cash flow crunch. It’s there to help you through times like these.

Saving money in a financial downturn

With many people facing a loss of income due to business closures, reduced hours, sickness and quarantine, and a recession on its way, every dollar counts and it can be even harder to put money aside. Here’s what you can do to ensure you’re still making progress towards your savings goals.

  • Prioritize your emergency fund.

I know, we’re repeating ourselves, but only because it’s probably the most important point in this article. Experts recommend having an emergency fund that can cover 3 to 6 months worth of expenses. It’s OK if you don’t already have one, or if saving that much  isn’t possible for you, right away. The important thing is to put aside whatever you can, as soon as you can.

Keep your emergency savings in a separate account from the one you use for day-to-day transactions. By putting your savings in a Mylo account, you can easily add to it automatically and still access your money in a pinch with next-day withdrawals.

  • Make a budget. 

It’s time to prioritize your expenses and savings and reduce unnecessary spending. Even if you already have a budget, consider creating an emergency budget that cuts out even more non-essential items. See our guide on how to create one in three easy steps. You can also use an app like YNAB.

Don’t forget to factor savings into your budget. After calculating your expenses, see how much you can afford to put aside each month and then automate the process. By ‘setting and forgetting’ recurring deposits, you’ll have an easy, stress-free way to ensure that you’re saving consistently.

  • Track your spending.

Telling your money where to go is one thing. Seeing where it’s actually going is another. While it’s possible that you’ll spend less money during self-isolation, it’s also easy to overspend on things like online shopping, digital subscriptions and restaurant deliveries. Tracking your spending will allow you to stay on budget and easily identify when and where you need to cut back if you veer off track. 

If the thought of writing down every dollar you spend seems tedious, download an app like Mint or Wally to do it automatically.

  • Identify all opportunities to save.

Take some time to go through your expenses. Are there any subscriptions or memberships that you’re not currently using? Are you spending too much money on services like your cellphone? Can you call and negotiate your bank fees? You might be surprised to find how much money there is to be saved. 

  • Renegotiate or renew your mortgage.

Canada’s major banks have dropped their prime rates by a full 1 percent in the last two weeks, following rate cuts from the Bank of Canada. We recommend speaking to your mortgage broker to see what these new rates mean for you and if you’re in a position to capitalize on them. Keep in mind that if you’re breaking your existing mortgage early, you may need to pay a penalty, but depending on the improvement in your new rate, it could be worth it.

  • Apply for any benefits or financial aid you’re eligible for.

The Canadian government has put in place a huge aid package to support Canadians impacted by the pandemic. Research what you qualify for and submit your applications as soon as you can. Don’t be discouraged if processing times take longer than usual. The main thing is to make sure you take whatever action is required. 

New information is being released constantly, and the team at Mylo will do our best to help you navigate them. See our roundup of what’s been announced to date.

Managing Debt

  • Keep on top of your debt payments, if you can.

If your financial situation allows, we recommend continuing to pay off your debt so that you don’t negatively affect your credit score or accrue any additional interest.

If you’re using a credit card, aim to pay it off in full each month if you can afford to. And keep an eye on your transactions—more online purchases during self-isolation could mean that your credit card bill is higher than it usually is.

  • If you can’t keep up with your payments, check what support is available and contact your creditors.

Limited cash flow means that many Canadians may struggle to keep up with payments on their mortgage, credit card or student loans during this crisis. 

Luckily, there’s support available.  

Canada’s big six banks have announced that they will provide flexible payment arrangements. Contact your bank as soon as you can to see if you are eligible for deferred payments on your mortgage and/or credit card debt. Be aware that you are still required to pay interest on your deferred payments, so you may end up paying more in interest payments as a result.

For students, the Canadian government has paused the repayment of Canada Student Loans and Canada Apprentice Loans for six months until September 30, 2020. Some provincial governments such as Quebec and Alberta have also announced similar measures. 

Stay tuned for additional measures. As mentioned, we will do our best to keep you updated.

  • Don’t take on more debt, unless you really need to.

While we understand that this won’t be possible for everyone, our advice is to reduce your expenses and access all available support before taking on more debt. Please also do not take on extra debt to cover the costs of unnecessary bulk buying. 

We may be feeling the financial impact of COVID-19 for a while. Good financial health and habits are more important now than ever.

Mylo Advisor

We each have unique financial situations, and there is no “one size fits all” solution for finding ways to overcome the financial challenges that may lie ahead. We recently rolled out a new service, Mylo Advisor, and we’re hard at work expanding our capacity to offer it to all of our users.

Advisor gives you access to real-time live chat with an expert financial advisor that can answer any questions that you may have about your personal finances and help make you make the best possible financial choices. Join the waitlist today

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Dave Fortin is a Chartered Financial Analyst and a portfolio manager for Mylo users with Tactex Asset Management, a wholly owned subsidiary of Mylo Financial Technologies.