There’s a good chance that your family has strayed from your “normal" finances over the course of the past year or so. Whatever your circumstances, the pandemic likely changed the way you look at money: how and where you spend, how you invest, the importance of an emergency fund, and whether or not you're living within your means.
Now that's there's a light at the end of the lockdown tunnel in Canada, it's the perfect time to update your family's financial plan as you look ahead to your new normal.
Here, we break down the key components to building a comprehensive (post-pandemic) financial plan for your family, step by step.
Review your total household income
The past year-plus has been volatile on the income front: layoffs, furloughs, reduced hours, new jobs, affected bonuses, and government assistance. Now that things have started to settle, the first step in building a sound family financial plan is to determine your total monthly and annual cash flow for your household.
Assess your total debt and plan to pay it off
Credit cards, loans, lines of credit and mortgage deferrals were a necessary reality for many. Now, debt repayment may be a top priority. The money you're spending on interest would be much better off in your savings account, earning you interest, so the faster you clear your debt, the better.
Plan to pay off high-interest debts first — credit card debt is a good place to start. Consider consolidating all your debt in one place, where the interest rate is low. If you're not sure where to start, speak with an advisor about managing your debt.
Watch the video: How to pay down debt
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Track and reduce your family's fixed expenses
Now that “normal" costs such as childcare and commuting, plus any payments you deferred, are back on the table, sit down and create an extensive list of all your family's fixed, recurring expenses. Take note of all utility bills, car and insurance payments, subscriptions, phone plans, rent or mortgage payments, groceries — the list goes on (and on and on).
Now, reduce or eliminate as much as possible. Do you still need all of those streaming services? Can you opt for free audiobooks from the library instead of your audio subscription? Try to renegotiate your family's phone plan. Every little bit helps.
Consider bundling your financial products and services so you can connect to your banking all in one place. Scotiabank offers the Scotiabank Ultimate and Preferred Packages, which has great benefits like fee waivers, cash incentives and bonus interest rates.
Take advantage of tax strategies for families with children
Even if tax season is months away, figure out how to maximize your tax return now by familiarizing yourselves with all the government benefits available to Canadian families — childcare expense deduction, Canada Child Benefit, and more.
Plan for 6- to 12-months of emergency savings
If the pandemic has taught us anything, it's to always prepare for the unexpected. Your savings priority should be to refill your emergency fund that may have taken a hit over the pandemic — or start building one if you haven't already. Your emergency fund should be able to realistically sustain your family for six months to a year.
Make sure your life insurance and estate plan are in order
No matter how young and healthy you are, it's important to ensure your life insurance and estate planning is in order — especially when you have a family. If you haven't yet, do your research to decide which plans are right for you now.
Set (or re-set) your family's financial goals
Now is the perfect time to reassess and realign on your family's financial goals. Annual incomes may have changed, your priorities may have shifted, or your goal timelines may need to be bumped if you stopped contributing to your savings during the pandemic.
Feel free to get the whole family in on this one — this is the fun portion of planning. Involving the kids in your financial decisions helps to hold you accountable — especially if one of your goals is something like Disneyland — and also helps to teach financial literacy early on.
Start with big-picture, long-term financial goals — those that are more than five years away. Think retirement savings and old age (you don't want to be a financial strain for your children), major moves, and post-secondary education. Mid-term goals should include anything within three years and short-term goals are those within a year or two (hello family vacations, finally).
Define your goals clearly and be specific. Once you have a set dollar amount objective, work backwards to figure out what monthly or weekly savings, you'll need to implement to get there.
Review your investments
Check if your investments still make sense for you. Does your current investment plan support your now-revised financial goals? Are you still comfortable about the level of risk you're taking? Are there any new opportunities you should be capitalizing on? Now is a great time to speak with a Scotia advisor for a portfolio review.
Build your family budget
Solid household budgeting is crucial to keeping your family in check. Unplanned spending and impulse buys can really add up. And in a post-lockdown world, where we're free to go to restaurants, movie theatres, amusement parks and so much more, life is all of a sudden and once again, very expensive.
Once all your fixed expenses and financial goals are accounted for, start allocating what's left of your family income to monthly variable spending based on set categories: entertainment, family weekend trips, date nights, restaurants. You can get as specific with these categories as you want.
Consider using a budgeting app that links with your bank account to not only set up your budget, but to monitor your spending and even keep track of your goals progress as you go. Opt for one that supports multiple users so your partner and even your kids can get involved.
Carefully monitor all spending
While tracking your family’s spending, whether in a good-old-fashioned Excel spreadsheet or a personal finance app, keeps you aligned with your budget, the hard part will be actually sticking to your plan. As you track your expenses every month or, ideally, every week, you'll learn from your habits so you can fine-tune your spending behaviour. All of a sudden, those daily iced coffee runs, takeout lunches and Amazon whims will stand out.