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Coronavirus information
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Locking down the economy for a few months has created a lot of pent up demand to spend money.

Consumer spending is vital to economic growth, but we need some ground rules. If you’re fortunate enough to be in strong financial health at this stage of the pandemic, consider a 50-50 rule. Spend no more than half the extra money you saved in recent months and keep the rest in savings.

While many people remain financially damaged by the pandemic, there’s been a rebound from the depths of March and April in spending on things like furniture, home improvements and new vehicles. Also, the housing market is blazing hot in some cities.

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We need people to spend if we want the economy to grow and the job market to improve. In a way, making a big purchase right now is a patriotic act. But it’s premature to recalibrate your finances back to pre-COVID days. Keep half – or even three-quarters – of your pandemic savings as a hedge against any setbacks ahead that lead to lost jobs and reduced incomes. Store the money in a high interest savings account – there were still a few alternative banks and credit unions offering 2 per cent as of late July.

Investing your money is also a possibility, but only if you think you won’t need it for at least 10 years. The stock market has been humming the Monty Python tune “Always look on the bright side of life” for months now. If the economic recovery disappoints, if new COVID-19 cases surge or if there are delays in deploying a vaccine, stocks could fall. Don’t risk money you might need to pay your bills in a few months by investing in stocks.

Buying things for ourselves represents a much-craved return to normalcy. Enjoy the buzz, but in moderation. You may yet need the money you effortlessly saved in the dark days of spring 2020, when so many of us were locked up tight in our homes.


Subscribe to Carrick on Money

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Rob’s personal finance reading list…

Have you updated your car insurance?

Remember the discount on your car insurance that you got for not driving much? With the economy opening up, more of us are driving at close to normal levels. If you’re in this position, it’s time to advise your car insurer.

A smoother ride in the stock market

A critical look at low volatility ETFs, which have built a big following on the idea of providing access to stocks that fluctuate less in price than the broader market. Some good tips at the end if you decide to buy in.

How traffic tickets affect your car insurance

A look at minor and major infractions and how they can affect your vehicle insurance premiums.

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New choices for socially responsible investing

A look at a pair of exchange-traded funds created by the robo-adviser Wealthsimple for clients who want a socially responsible portfolio. Oil and gas companies are excluded, as are companies in the top 25 carbon emitters in their industry.


Ask Rob

Q: My self-directed investment account consists of big bank stocks and Enbridge as well as Apple. I intend to hold on for long term. Is this a good strategy?

A: Those sound like good long-term holds, but you’re not as diversified as you could be. Considering adding positions in sectors like utilities, consumer staples, industrials and technology. A Canadian equity ETF would do all the diversification work for you – financials would be the top sector holding at around 30 per cent.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.


Today’s financial tool

Looking for responsible investing options – i.e., mutual funds and exchange-traded funds holding the shares of companies that score well from an environmental, social and government point of view, or that exclude sectors like weapons or gambling? This screening tool can help you find out what’s available.


ICYMI

What I’ve been writing about:

More Carrick and money coverage:

Subscribe to Stress Test on iTunes or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group. Send us an e-mail to let us know what you think of my newsletter. Want to subscribe? Click here to sign up.

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Even more coverage from Rob Carrick:

Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.

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