People fortunate enough to be working through the pandemic have a common reaction when asked about how much money they’re saving – it’s utter amazement.
Not paying for childcare and going out only to shop for essentials or exercise does tend to cut down on weekly and monthly spending. It’s realistic to project thousands of dollars in saving for many households, particularly those with young children who would otherwise be in daycare.
Helping people make the most of the money they’ve saved in recent months is the point of our new Pandemic Power-Savings Tool. Use it to compare your spending during and before the pandemic in all the main categories of household budgeting. You might well be spending more on groceries and monthly utility costs, but less on gas, entertainment, daycare, gym memberships and more.
The Pandemic Power-Savings Tool will tell you how much you’re saving overall and then show what would happen if you put this money into savings or investments. Consider the savings option if you’re concerned about your job security in the current economic slowdown, a drop in income or if you would benefit from a larger emergency fund. Having this cash on hand could save you in a future emergency.
The investment option is worth a look if you’re able to let this money sit for 10 years or more. That’s long enough for stock market ups and downs to produce a solid average annual return.
A lot of damage has been done to the finances of the nation as a result of COVID-19. A small bit of good to come out of all this is all the money being saved in fortunate households. If you’re lucky enough to be in this group, don’t waste the opportunity to use this money well.
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Rob’s personal finance reading list…
Would you buy a house after only a virtual tour?
Me, neither. But in a recent survey, 42 per cent of people said they would be open or somewhat open to buying a home after viewing it only by electronic means. This is housing bubble behaviour. Snap out of it, people.
The long and winding list of stocks that have cut dividends
Some good work here by Mathieu Litalien of Stocktrades.ca on companies that have had to reduce or suspend their dividends as a result of economic setbacks in the pandemic. Read the comments for a few additional stocks that were not included.
When should you sell a stock?
Number One on this list of five points, a high dividend yield, caught my eye because it’s so relevant right now. Many dividend stocks have fallen in price this year, and that means their yields have increased.
Can you overdo it on saving money?
A blog post that is very relevant to these times – it considers what happens to the economy if everyone becomes an extreme saver. The economy needs us to spend responsibly right now – look after yourself, but remember that businesses are depending on you to survive.
Ask Rob
Q: I am paying off my mortgage in August. The bank wants to keep my business and have a secured line of credit on the house. I’m not so sure. One of their arguments is that if I ever did want to have a secure line of credit, all the legal fees have already been completed and it is just waiting there. Pros and cons?
A: Having a HELOC at your disposal is a good idea. A source of cheap funds if you need to borrow for a short period, say a year or less, and for emergencies where you have depleted your savings. It’s also correct that you would likely have to pay hundreds in fees if you wanted to set up a HELOC later on. The cons: Will you be tempted to dip into your HELOC and get yourself into debt? If you’re a disciplined borrower, get the HELOC and let it lie until needed.
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
A reader pointed out this compound interest calculator as an alternative to one mentioned in a newsletter last week. The advantage of this new calculator is that you can factor in monthly contributions.
What I’ve been writing about
- Bank of mom and dad will need to step in as millennials struggle in the pandemic
- For once, mutual funds aren’t trounced in a comparison with ETFs (for Globe Unlimited subscribers)
- Hello, stock market? An 80-something with $500,000 in a savings account looks for higher returns (for Globe Unlimited subscribers)
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Rob Carrick