Thursday, November 11, 2021

Spending after the P(andemic) Word

Tips to avoid blowing your savings in the post-pandemic world

Though we’re all tired of hearing about the pandemic and its cascading effects, COVID-19 has changed everything—from how we travel to how we shop to home buying. But there are some positives to take away from our time in lockdown.

For starters, nearly 70 percent of mid- to large-size businesses believe they will return to prepandemic operations by the fall, and more than 80 percent of Canadians are optimistic and feeling warm and fuzzy about their future prospects. The household savings and net worth of Canadians are up across all income levels, thanks in part to financial support programs offered by the federal government and a lack of entertainment, travel, and shopping options.

Still, as restrictions ease, you should be wary of the temptation to blow the money you may have squirreled away. Whether you are considering taking that trip you had been forced to put off or buying a new home, approach your next spend with caution, and keep the following information in mind.

Spending Mindsets

The Roaring Twenties – Revenge Spending
What it looks like – Going on shopping sprees because you have not been able to for more than a year.

A better approach – Don’t let emotions dictate your decisions. Research deals online before shopping, and stick to your list.

YOLO – You Only Live Once
What it looks like – Making big purchases like cars, homes, and travel to live life to its fullest.

A better approach – Decide which purchase will be appreciated the most, and give yourself enough time to decide and save for it.

MUFLT – Make Up for Lost Time
What it looks like – Spending more because you’ve managed to save a bit of cash during the pandemic.

A better approach – Speak with a financial advisor to determine how best to invest that extra cash.

5 Postpandemic Budget Reminders

Driving is more expensive. Gas prices are up, and if you got a discount on insurance due to reduced mileage, your premium may rise if you are driving more now.
Add new work clothes or formal wear for upcoming weddings, celebrations, and other events in your budget.
Dining out may cost you double or more than takeout, once you factor in alcohol and tips.
Be aware of your budget as you head to the mall—and stick to it.
Look for ways to reduce costs, such as cancelling streaming services if you won’t be watching as many shows.

Postpandemic Travel Plans

22% – Canadians who had plans to travel over the summer in 2021

15% – Canadians who planned to travel domestically

55-64 – Age group most likely to travel post-COVID

8 Tips for Staying Safe While Travelling

Don’t be dazzled by post-COVID travel deals. It may be best to hold off until things settle down closer to the end of the year or in early 2022.
Forget about booking your trip yourself. Travel restrictions likely will continue to change, so rely on the expertise of a travel agent to guide you.
Buy trip cancellation insurance and read the fine print. What will you be reimbursed if you are unable to travel due to sickness or restrictions? What will you be on the hook for?
Provide proof of vaccination. Some insurance companies either require proof or will provide extra coverage for those who have received both vaccine shots.
Consider staying local. Spending your travel and entertainment dollars nearby will help your neighbours and the local economy.
Read reviews. Pursue recent reviews for notes about the sanitary practices of the places you plan to visit (hotels, museums, etc.).
Consider wearing a mask. Even if the location you are travelling to no longer requires masks, there’s no shame in donning one.
If you can, avoid public transportation. Rely on taxis, Uber, or car rentals instead.

Postpandemic Home Buying

Most Affordable Cities

Quebec City
Edmonton
Winnipeg

Least Affordable Cities

Vancouver
Toronto
Hamilton, ON

Average Time to Save for a Down Payment*

63 months (5.25 years) – Canada

278 months (23 years) – Toronto

389 months (32 years) – Vancouver

*Based on a 10 percent savings rate and the median income

6 House Hunting Dos and Don'ts

James Laird, cofounder of Ratehub.ca and president of CanWise Financial mortgage brokerage, shares his top tips for getting your dream house at a great price.

Do consider your mortgage rate options. Variable rates are at historic lows, and fixed rates are slightly higher than the pandemic’s record lows. Speak to a mortgage broker to find the best option for you.
Do be organized. Know what you’re looking for ahead of time (location, type of home, size of property) before beginning your hunt. It also pays to have mortgage preapproval.
Don’t be afraid to be competitive. The pandemic was a sellers’ market. If you find a home you love, be aggressive with your offer to help it stand out, but don’t go over your budget.
Do shop around. Many Canadians stick with their home bank when applying for a mortgage, but other credit unions and lenders may be able to offer you a better rate or terms
Don’t shirk the city life. During the pandemic, many fled the city to the suburbs and country. Consider looking within city limits for deals left in their wake.
Do consider your income. The maximum mortgage approval is about 4.7 times your income. But if you have other financial obligations (e.g., putting kids through college), don’t purchase at your maximum limit.

Sources: Sources: belairdirect.com, scotiabank.com, financialpost.com, cbc.ca, theglobeandmail.com