How to save smarter when you’re spending less
Among all of the challenges that COVID-19 has brought, there have also been some positive changes that have emerged. The environment has benefitted from lockdowns, with pollution dropping dramatically in major cities across Canada and the world. Better air quality is expected to prevent thousands of pollution-related deaths this year. Plus, fewer cars on the roads have also led to less car accidents.
Approximately 50% of Canadians are experiencing only a minor impact on their finances, or none at all. Spending habits have changed, and having lower monthly expenses may provide an opportunity to boost savings. If your finances have been hit by COVID-19, we recommend that you read our article on how to find financial help during the COVID-19 crisis.
What to do with additional disposable income?
Many of the fortunate Canadians who are working are finding that they suddenly have more disposable income. With no restaurants to eat in, no concerts or sports to attend and no malls to shop in, Canadians’ discretionary spending has plummeted.
It’s not just the fun stuff that we’re no longer spending on either. Commuting costs have been reduced as more people work from home. Daycare costs have similarly been cut for many families.
So, what should you do with the extra money you might find yourself with?
Work out your financial priorities:
Making the best use of any extra money depends on what your financial goals are. You may want to pay down debt, save for a wedding or a down payment on a home, or invest in your kids’ education. Or, maybe you want to make sure you have a secure retirement.
While your extra money could get you into your own home sooner, or give you a more lavish wedding, any extra cash you can save now will have a greater impact the longer you invest it.
Any amount you put into your child’s RESP today could double by the time they start college. Extra cash saved now could quadruple in value by the time you come to retire. Using the power of compound interest could mean that your extra money could make a bigger difference to your finances in the long term.
Before you do anything, get advice!
Talk to your financial planner before you do anything with your extra money. They’ll be able to help you to invest your extra money in a way that can bring the maximum impact. They’ll be able to help you work out if you have contribution room in your TFSAs or RRSPs for even faster, tax-free or tax-sheltered growth.
They’ll also be able to recommend the best ways to integrate your extra cash into your current financial plan and suggest ways to potentially boost your portfolio. Contact your IG consultant today and start getting your extra money working for your future.
Published as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an IG Wealth Management Consultant. Trademarks, including IG Private Wealth Management, are owned by IGM Financial Inc. and licensed to its subsidiary corporations.