As you all know, earlier in the year, I bought a home. I used the majority of my savings which was a weird feeling for me. Even though I knew I was building equity, seeing my six digit savings “disappear” was not a good feeling.
Right now, I’m rebuilding my savings, so every purchase hurts. I bought a new TV, but I really started to second guess myself if that was a wise decision, it’s not like my old one wasn’t working. But that natural saver in me will always ask if I really needed to spend that money?
In the end, my purchase wasn’t a big deal since I had the money saved, but how we spend our money comes down to our moods. If we’re feeling confident, we’ll naturally we’ll spend more, so what’s the overall feeling in Canada?
Just 16% of us say they’re “very confident” while 41% say they’re “somewhat confident,” this according to the new Mood of the World Report from GFK. As the name of the study implies, this was a world study, so it’s interesting to see how Canadians are feeling.
Canadians are concerned
The report covered a variety of topics, but since this is a money blog, I’ll focus on the top three concerns of Canadians when it comes to their finances.
- Having “money enough to live right and pay the bills” – 48%
- Inflation and high prices – 45%
- Recession and unemployment – 30%
Why are we so worried? The weak Canadian dollar hasn’t helped, job cuts are always being announced, and the insane prices of homes come to mind. To a lesser extent, you could say that some of us are worried how the Trump victory will affect Canada, but in the end, this is all just background noise. The only thing you should be asking yourself is what am I going to do about it?
Preparing ourselves instead of worrying
Earlier in the year, I wrote about preparing your finances in case of a downturn and how to prepare for unemployment. I wrote those posts because the economy wasn’t doing well at the time and the overall mood I was getting from my peers was not very positive. Things don’t seem to have changed much, so let’s look at what we can do now to help with our finances.
Look at our debt – If you have high-interest debt, make it your priority to pay it down. You simply won’t get ahead if you’re paying 19.99% interest. Low-interest debt such as a mortgage or car loans are probably manageable, but only if you didn’t overextend yourself to begin with. Get these things on track and worrying about having enough money to live will hopefully be less of a concern.
Price compare – I hate paying more for things than I have to, so when I shop for things, I try to get the lowest price possible. I shop at No Frills instead of Metro since everything is like 25% cheaper. In addition, I use the Reebee app since I can compare prices at various grocery stores and price match immediately. Price comparing and matching will help offset inflation.
Build an emergency fund – Having an emergency fund is a must for all Canadians. You won’t need to worry as much about a potential recession or job loss if you have an emergency fund in place. The idea is to have 3-6 months worth of expenses so you can deal with your “emergency” without having to worry about money.
Stop spending – Fortunately, the study did find that Canadians are less likely to plan on making purchases due to their uncertainty. Obviously, if you’re worried about your money, you should cut back on spending and save.
Ignoring all the external noise
Most of the time, what we think about money is based on what’s going around us. Before the U.S. election, I heard from multiple people that they were pulling out all their investments just in case Trump won.
Guess what happened when Trump won? The markets actually went up. Had people just stuck to their plans and left their portfolios alone, they would have seen their portfolio grow. Instead, they’ve either bought back at the higher prices or stuck to the sidelines.
A few weeks back, pot (marijuana) stocks climbed like 20% in a week. All of a sudden, some people thought they were experts are started buying them up since they believed that marijuana would be available to all Canadians soon. The following week, prices started to fall and many people panicked.
As mentioned, oil and the weak Canadian dollar were big factors this year. Last year it was Greece and China. There will always be something going that might make us worry, we just can’t let it affect our decisions.
Our emotions will always play a major role in our decision making. We’re literally wired to make bad decisions. Instead of trying to time the markets, we should just take our emotions out of investing and stick to our plan.