How has Covid-19 impacted your personal finances? For the past six months the focus has been on making sure income supports were in place for employees who lost their jobs and for businesses who were forced to shutdown or reduce their operating capacity.
Outside of weekly trips to the grocery store, most of us sheltered in place for many weeks before the economy slowly opened back up across the country. That meant little to no spending on travel, dining, and entertainment – three of the hardest hit industries.
That resulted in Canadians stashing away $127 billion into their chequing and savings accounts in the first half of 2020. In other words, Statistics Canada reported the national savings rate jumped from 2-3% pre-pandemic to a whopping 28.2% from April through June.
That’s a seriously impressive savings rate, but one that has to be reconciled with unemployment still at 10.2% and more than 500,000 mortgage deferrals soon coming to an end. There’s clearly a disparity between those with the means to work from home and save, and those whose livelihoods have been turned upside down.
We are, thankfully, in the former group and have managed to keep a consistent income working from home. Our big savings were travel refunds from our trips to Italy and the U.K. But we put most of that into our backyard; pouring a concrete pad, buying a hot tub, and replacing our patio furniture.
I don’t keep a close eye on our savings rate but I was curious so I pulled up our budgets from the previous five years. Our savings rate has increased this year and we’re projected to save 36.5% of our income. The increase is mainly due to pausing our gym memberships, less restaurant spending, and less on entertainment and travel. It might have hit 40% if our wine budget didn’t increase 🙂
Our savings rate for the past five years:
- 2020 – 36.5%
- 2019 – 30.8%
- 2018 – 31.7%
- 2017 – 29.4%
- 2016 – 26.6%
Has your savings rate changed during Covid-19? Let me know in the comments.
This Week(s) Recap:
I wrote a bit of a tongue in cheek post about whether I’ve already achieve F.I.R.E. (Financial Independence, Retire Early). To be clear, I’m definitely not retired. It just feels that way when you can work on what you want, when you want.
From the archives: 5 financial traps seniors fall into and how to avoid them
In case you missed this on Rewards Cards Canada, here’s a look at Air Canada’s reimagined Aeroplan program.
I got to see a sneak preview of a new investment product that will be launching this week. Without giving anything away, I’ll just say that you’ll definitely want to keep an eye out for my review on Wednesday.
The credit card sign-up wars are starting to heat up so now’s the time to start looking for a new rewards card (or add a new one to your line-up). Our friends at Credit Card Genius have you covered with the best credit cards in Canada.
Jason Heath looks at the financial implications of buying a vacation property.
Nick Maggiulli looks at why poor people stay poor. The answer is complicated, but they are, in essence, stuck in a poverty trap.
An interesting take by Max Fawcett – Progressive parties have spent too long insisting that they won’t tax home equity. Here’s a thought: Maybe they should.
I loved this post from Morgan Housel, who explains why you should save like a pessimist and invest like an optimist:
“Be a little bit paranoid, knowing the assumptions you hold today could break tomorrow, and you’ll need enough room for error to make it to the next round.”
Here’s Nick Maggiulli again explaining what your psychology says about your relationship with money.
Related to my introduction on spending and saving during the pandemic, Preet Banerjee’s latest SPENT video shows how Americans spent their weekly $600 unemployment benefits:
The Irrelevant Investor Michael Batnick explains why money printing won’t cause inflation.
Speaking of inflation, Alexandra Macqueen wrote a guide to help you understand inflation, how it’s calculated, and what it means for your personal finances:
“The CPI is not without controversy, however, and one of the most disputed aspects is how the index treats the cost of shelter.
The cost of housing prices is excluded from the CPI, although runaway housing costs have characterized the last decade in Canada’s major cities.”
The Michelle is Money Hungry blog shares an important conversation about time freedom.
Millionaire Teacher Andrew Hallam explains why the intelligence of an investment decision shouldn’t be judged based on stories, hopes, forecasts…or an isolated result.
A Wealth of Common Sense blogger Ben Carlson shares a key lesson on why even the best stocks have to crash.
Curious about the 4% safe withdrawal rule? See if you can pass this quiz on the Michael James on Money blog.
Travel expert Barry Choi shares a guest post on the My Own Advisor blog on whether travel hacking is worth it.
Another addition to the asset allocation ETF game. This time it’s TD, with what they call their One-Click portfolios.
Finally, check out this fascinating read on money – the true story of a made up thing.
Have a great weekend, everyone!