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How to take control of your personal finances during COVID-19

May 5, 2020

A new Rotman webinar looks at how to make smart financial decisions and rise above the panic that develops during a crisis.

With economic activity at a standstill, many Canadians are growing increasingly concerned about job security, keeping up with bill payments and their retirement savings.

During these very uncertain times, how can we make smart financial decisions and safeguard our savings?

Ken Corts, filling in for Dean Tiff Macklem, sought the answer to this and other questions in Navigating Personal Finances During COVID-19: What You Need to Know to Take Control. In this recent webinar, Corts, vice-dean of faculty and research, spoke with Claire Tsai, an associate professor in the Marketing area and Preet Banerjee, a respected consultant and finance educator, on the traps people fall into and how to approach financial planning during a crisis.

“When investors deviate from their long-term goals, they are locking in losses and missing out on the market rallies to come.”

—Claire Tsai, Professor of Marketing

Do not let fear drive your financial decision making

During these uncertain times, as stock prices continue to decline, investors might get swept up in feelings of loss and pain. Instinctively, they may want to sell off any remaining holdings to stop these negative feelings.

Those who do are making a big mistake.

“When investors deviate from their long-term goals, they are locking in losses and missing out on the market rallies to come,” explains Tsai, a co-founder of the Behavioral Economics in Action Research Cluster at Rotman.

Tsai offers three quick tips on how to stay calm and keep your money safe:

1. Resist the urge to check on your investments constantly.

Delete financial apps from your phone to make it less convenient to make trades and sell off stocks.

2. Commit to your long-term plan.

Avoid making decisions in the heat of the moment and stay focused on your financial goals.

3. Keep your situation in perspective.

Tsai encourages investors to look at the bigger picture and to crunch the numbers on worst-case scenarios. Most will find that this downturn will not impact their investments or retirement savings as much as they had imagined.

What to think about if you are approaching or in retirement

Those approaching retirement should consider working an additional year or two to make up for any losses. And Tsai reminds investors that they will have other sources of income during retirement, such as the Canadian Pension Plan retirement pension and Old Age Security benefits.

For those who are already retired and actively drawing from their retirement savings, she suggests taking money from fixed income accounts first and to avoid selling stocks, as the market will eventually rebound.

Most importantly, stay positive.

“Recession and downturns do not last forever,” she says. “Don’t make impulsive decisions when you are anxious.”

Only take advantage of COVID-19 relief programs if you need to

Both Tsai and Banerjee advise consumers to think twice before applying for mortgage and debt deferral programs. Though these programs offer debtors a break from making regular payments, interest is still accruing on the amount borrowed — and this can add up significantly.

“If you don’t need to access these programs, you probably shouldn’t,” says Banerjee. “It's a last resort if you are experiencing a severe cash flow crunch and you simply cannot make those payments.”

As well, it’s not clear whether taking advantage of mortgage relief programs will hurt your credit score. Banerjee says clients should ask about this and document the responses when negotiating payment deferrals with financial institutions.

Is now the time to invest?

Many investors are wondering whether this might be the perfect opportunity to inject more money into their investments so that they can reap the benefits when the economy recovers.

Banerjee reminds us that no one can time the market. It’s impossible to know whether prices will bottom out, go sideways, or go up in the short term.

He recommends sticking to good financial planning practices, which hold up in good times and bad. This means considering your goals, time horizon and attitude toward risk.

“The best investment portfolio is one that you can stick to,” he says. “If you have the confidence to invest, do so on a disciplined, long-term basis.”

To learn more about taking control of your finances, watch the recorded webinar:

More Rotman Insights | More from this webinar series

More from this webinar series

Managing Uncertainty: Adapting to and learning from the COVID-19 crisis

Watch past or see upcoming webinars →

Meet the expert

Claire Tsai

Associate Professor of Marketing

Read her full biography →