Staying home during the pandemic saved lives and cash

BY CLEVE DeSOUZA

As the COVID-19 vaccines become more and more commonly available, we’re all looking forward to the end of the months-long pandemic that has affected every part of our lives.

Before you start planning vacations and nights out with friends, though, take a moment to consider some financial gains you may have made over the last year. The pandemic closed businesses and forced people to stay home. We spent less money on entertainment, transportation, clothing, shopping sprees, and more.

Slashing our budgets wasn’t the intent of the restrictions, but it did have that effect. As a result, in the first quarter of 2021, the CIBC reported that Canadian households were sitting on about $90 billion in cash. On average, each household saved about 13% of their income during the pandemic. Before the pandemic, we saved less than 4% of our income.

If you’ve been keeping that “extra” money in a savings account, it’s time to move it. A savings account is safe, but you can do so much better. On average, a savings account pays 0.05% interest, while inflation means your expenses rise about 2% a year. That means if you leave your money in a traditional savings account, you can expect to slowly watch your bottom line whither.

Instead, that money you saved during the pandemic could represent the perfect opportunity to begin building your wealth.

The first thing you need to do is educate yourself about money. Read books by Rich Kiyosaki, who offers down-to-earth advice. Or Google articles about self-made billionaire Warren Buffet. Don’t forget to consider the benefits of a good mind-set. Reading about Carol Dweck, an expert on adopting a growth mind-set, will help you in every part of your life.

While you’re studying, make sure you familiarize yourself with key financial principles. You need to understand the difference between simple interest, which is interest paid only on the principal amount of your investment and compounding interest, which is when you earn interest on the principal amount plus any interest you accumulate. (Hint: you want investments that pay compounding interest).

Learn everything you can about proven money-making opportunities such as real estate. Examine how investors buy homes, and then turn them into rental properties to make money. If you’ve got construction experience, consider buying a fixer-upper, making repairs, and then selling it for a profit. Real estate also is a great way to leverage your money. In simple terms, leverage is using other people’s money to make more money for you.

Next, begin taking calculated risks. Sure, your money is safe and protected in a savings account. But if you are willing to accept a little bit of risk, you can make your money work for you. The more risk you are willing to take, the more you stand to benefit. Contact a trusted adviser to help gauge your risk tolerance and to steer you to appropriate opportunities.

Finally, remember that even as businesses open up again, you don’t have to open your wallet. Choose wisely when deciding what activities to resume. Sacrificing a few dinners out now can pay off with a financially secure future.