COVID is at the forefront of many people’s thoughts. It seems to be all that people can focus on and talk about. COVID has been around for nearly nine months now. That is a considerable amount of time. Having so much of our daily lives consumed by one subject may have some adverse effects. What consequences does this have on the individual Manitoban?
Well, the obvious answer is health concerns. Did you know that over 11,000 people died from all causes in Manitoba each of the last 4 reporting years? That’s more than 200 a week and more than 30 a day. The most recent reporting year which ended June 30, 2020 saw an increase of 129 deaths. This includes the deaths due to COVID in the first 6 months of 2020.
Besides the elevated health risks, what effects could COVID have on you? Certainly there will be many financial ramifications and plenty of fall out from the restrictions and shutdowns imposed to help curb the spread of COVID.
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Delaying Financial Goals Because of COVID
Those that have been lucky enough to keep their jobs through COVID have fared quite well financially. However, that has not been the case for everyone. Even those that have fared well, are more stressed about money.
The financial hardships that the onset of COVID induced has caused many to worry if their financial goals are actually a possibility. It has caused an increase in doubt and fear. Thus, triggering people to push back financial goals.
Even if they are still currently on pace for their goals if we enter a time of higher than average inflation that could change. Many Canadians are starting to see that high inflation is a real possibility. This could wipe away a large chunk of purchasing power and cause more people to delay their goals further.
The delaying of financial goals might not seem like a big deal. However, for those already in retirement, it can mean the difference between achieving them or not.
The average person lives 20 years in retirement. However, 1 in 4 people will live 10 years or less. Generally, the end of retirement will be riddled with deteriorating health. So for a large chunk of people, they may only have 5-7 good years of retirement. That doesn’t leave a lot of time if some goals have to be pushed back 1-2 years or even more.
Creating Bad Financial Habits and Financial Absenteeism
The increased financial hardships and stress may cause many to fall prey to bad financial habits. For some it may not create bad habits but will just break good habits.
Good habits that could be broken quite easily are things like budgeting, automatic saving contributions, charitable giving, and strong financial communication. As finances become tight, many will stop contributions to savings and charitable giving. This relates to the first point about delaying goals. Once that habit is broken, it can be tough to start contributions even after finances stabilize.
The increased stress will cause increased discomfort when thinking and talking about finances. Not having those crucial financial conversations will lead to strife inside of relationships, especially marriages. You can read more about that in our post on The Importance of Talking Money.
If the discomfort grows to unmanageable levels, it will lead to absenteeism for some. Absenteeism is the habit of being absent. I’m sure we all know someone that says “I hate talking about money, I want nothing to do with those conversations”. Well although that may not sound harmful, having that philosophy can be detrimental. It can lead to marital issues, debt issues, anxiety, a lack of dependence, etc. Finances are an important part of everyone’s life, and that will continue to be the case. Getting to a point where you can manage those thoughts and conversations is very important.
Making Hasty Financial Decisions During COVID
In the present time of COVID, many may have found themselves making hasty financial decisions. This may include making full use of that extra credit limit to stock up on essentials like toilet paper. With this type of decision making, the expected increased level of consumer debt burden is obvious. Emotional decision making doesn’t stop with stocking up on essentials, unfortunately.
One of the areas of consumer behavior that may become troubling is home purchasing. With many new “work from home” arrangements becoming the norm, many people find themselves uncomfortably confined to their previously adequate accommodations.
Mortgage rates are dropping, and the temptation to vacate smaller residences in trade for more spacious housing in the suburbs is appealing. Many consumers are only looking at the monthly servicing costs of accommodation, framed by the new lower cost of having a mortgage. The decision to upgrade today may be appealing from an emotional and budgetary perspective, but sooner or later interest rates will rise. If interest rates rise quickly and wages don’t keep up, it could put many into even tighter financial situations.
The affects of COVID reach beyond just the health affects. It has caused increased stress and anxiety for many Manitobans. The financial damage that has occurred may cause many to miss out of things they have been waiting their entire life for. We need to recognize and acknowledge the consequences. We need to have those crucial financial conversations. Proper planning and financial discipline can go a long way.
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Disclaimer: This Forbes Wealth Blog is for informational purposes only and does not constitute financial, legal, or tax advice of any kind. Please consult your legal, accounting, tax, investment, banking, and life insurance professionals to get precise advice relating to your particular situation before acting upon any strategy