The financial impact of the pandemic has impacted all of us in one way or the other. However, financial risks are something we should all be aware of in our day-to-day lives. Minimizing financial risks will help you to create better economic outcomes, and achieve your goals and desired lifestyle.
By completing a financial risk assessment, you’ll get a clear picture of your current financial situation. An assessment takes your life stage, financial goals, debt-to-income ratio, into consideration, and ensures your investment strategy is aligned with your current situation.
It’s important to understand how you are doing financially:
- Is your income enough to cover your expenses?
- Is there a possibility you could lose your job?
- Do you have emergency savings?
- Do you have a contingency plan?
If you had a savings goal, is it still relevant? For example, if you were saving for a vacation, can you use that money for something else that may be a necessity today?
Next, take a look at your investments to reassess your risk tolerance.
- When you put away money for an emergency, your child’s education, or retirement, what are the investment options that you or your advisor selected?
- What was your investment objective, to maximize returns or to avoid loss should the markets drop?
- When the markets dipped were you comfortable with how your investments performed? A diversified portfolio will have softened the negative impact of a stock market decline.
Once you’ve assessed your investments and tweaked some of your savings goals, you may find your financial position is better than you thought.
Create a plan
You hear this all the time because it is tried, tested, and true: a budget is the best way to gauge your current situation and plan for the future.
List your monthly income and itemize your typical monthly expenses If you’re spending more than you earn and you’re relying on credit cards, loans or a line of credit to make ends meet, then you need to pay attention to where you are spending money. If you already have a budget, now is a great time to revisit where your money is going and decide what may no longer be important so you can find ways to save.
To help you get started, the Financial Consumer Agency of Canada has an easy to use online budget planner.
You can take steps to reduce your financial anxiety by focusing on fixing what you can control, and not worrying about what you can’t.
People Corporation’s My Financial Resource Centre provides a financial risk assessment and a guided path to tools and resources designed to increase your financial knowledge and improve your financial well-being. The portal is a great way to:
- Determine if your plans for retirement are on track
- Manage your money and build an emergency fund
- Reduce debt
- Make informed financial decisions
- Reduce financial stress