According to Statistics Canada, a surprising side effect of the pandemic is the highest household savings rate in history. Canadians have stockpiled savings somewhere between $150-billion and $200-billion.1 That has many of us rethinking our financial goals.
If you’ve been spared the financial fallout of COVID-19 and suddenly find yourself with higher-than-normal savings, remember: extra cash doesn’t change the fundamentals of your financial plan. Instead, it gives you a rare opportunity to fast-track your progress on the goals that mean the most to you.
Here are some ideas that can help you make the most of your extra savings.
Your goal: Find your balance
For many young lawyers, the No. 1 financial priority is tackling student debt. But it’s not the only priority. Time is your most valuable asset – and almost every financial goal you can name (including retirement) will benefit from starting as early as you possibly can. A good goal for 2021 is to talk to a financial advisor about the right balance between paying your debt and paying yourself.
Advisors can help you decide exactly how much of your income should go to debt repayment and savings, so you can make the most of every dollar.
Your goal: Review your priorities
Lawyers with established careers are likely to have a lot of financial obligations. This might include mortgages, lines of credit, and a variety of investment and savings accounts. If you have extra savings on hand, a good goal for 2021 is to decide which of your obligations would benefit the most from increased contributions or a one-time injection of cash.
The financial planning process might reveal that paying down a mortgage (or line of credit) isn’t the most effective way to put your money to work right now. Talk to your advisor about the best way to use short-term savings to build long-term wealth.
Your goal: Family first
Many lawyers who are either retired or approaching retirement may not have had the same Covid-related financial strains as their peers—but that doesn’t mean it’s business as usual.
Your goals for 2021 might include determining the best way to help your adult children, especially if their incomes have been reduced by the crisis. Financial help early – in the form of a living inheritance – can give young investors a tremendous advantage because it gives them time to take advantage of the power of compounding.
Learn why giving while living pays multiple dividends.
Your other goal: Have some fun
On top of all the financial goals you and your family are setting for the rest of 2021, it’s good to remember that health and wealth aren’t trade-offs. If you’re lucky enough to have extra savings right now, invest some of it in your fitness, take on a new hobby or treat yourself to a local holiday. You might be surprised by the effects a hotel confirmation can have on your happiness – even if that booking is six months or more away.
And if you have questions about the best way to make use of your savings, your Lawyers Financial advisor can help.
Source: 1 Maclean’s. What to do with all the cash you’ve saved during the pandemic. Brenda Bouw, Feb. 1, 2021.