The pandemic has no doubt had a major impact on many people's personal finances, especially young people living in the city.
We spoke to Peter Papadakis, a principal with the financial planning and tax advisory services at Kerr Financial, a financial advisor group with offices in Montreal and Toronto.
Peter shared his thoughts, specifically on the younger generations and how this year has affected us going forward.
Questions and responses have been edited for clarity.
What are the most common mistakes that young people make when it comes to their financial planning?
This question really goes back to the importance of establishing and/or updating your budget.
During the budgeting exercise, you would map out and prioritize in which order your debts should be paid off. Typically, you would pay off high-interest credit card debt before accelerating payments to your other debts.
The five most common mistakes young people make when it comes to their financial planning are:
They push the important exercise of looking at their financial plan further down the road.
They often need but do not seek the advice of a financial planning professional.
They set unattainable financial planning goals and unrealistic assumptions.
They do not stick to the financial plan and budget they have established.
They do not actively review their financial plan and budget.
What is the best advice for saving in the pandemic?
For some people, the pandemic has resulted in a loss of work, which has eliminated the ability to save. If you find yourself in this situation, saving may not be possible, and instead managing your spending would be most critical.
For others, the pandemic has offered a unique opportunity with fewer hours spent commuting and less cash outflow spent on lunches, coffee shops, going out and entertainment. Â
If you are one of the fortunate to find yourself in this situation, the key is to take advantage of the additional savings. Then, once you have taken advantage of the additional cash flow, saving basically still involves multiple simple ‘to do’ steps and is applicable under any situation.
You need to update or capture your financial situation, and this involves looking at your household budget. Gather your household disposable income and break down your living expenses in detail (for example rent, mortgage, utilities, insurance, entertainment).
At this point you should begin to answer the following questions:
Which expenses you are incurring are really necessary?
Is there an opportunity and desire on your part to increase or realize additional income?
How much money is left over?
From there you would be in a better position to determine your savings capacity. It’s important to stick to your budget and review it regularly, especially if there is a life-changing event (for example addition to the family, loss of a job, promotion, a windfall of cash).
Are there any stats for Montrealers' spending habits during the pandemic?
There are no specific statistics that we can point to that could answer that question of Montrealers' spending habits during the pandemic. We can tell you what we have observed through conversations with the public at large and national statistics/surveys.
The pandemic has produced a divergence in spending and savings.
The people that were fortunate not to have a disruption to their jobs and income have seen their savings increase and debt levels decrease. This is because their spending decreased given the lockdowns and the inability to spend on vacation, entertainment, other related expenses.
On the other spectrum, you have the individuals that have seen an interruption to their jobs and income and have had to:
Decrease their spending drastically to basic living expenses.
Defer mortgage payments.
Rely on government support programs.
Use their savings.
Use debt to support their lifestyle.
