As schools and businesses continue to operate, the fear of the second wave of infections looms. That’s especially true for Canadians who were hit hard economically by the initial shock of the pandemic.
Don't Procrastinate - Be Prepared
Nov 18, 2020
Why Do We Procrastinate on Building a Financial Plan and Fail to Follow Through?
It’s common to think of financial planning as something you’ll get to one day in the future. Often, it’s not until we face some sort of financial emergency or urgent situation that we realize we’re not as financially stable as we thought.
When we think about it rationally, we can see that it makes sense to get control of our money matters and plan for the future, and yes, it would be wise to meet with a professional financial planner. Yet we procrastinate on getting started. Even when people see a professional planner and work with them to develop a plan, they commonly fail to implement it. Why do we neglect to follow through with our intentions?
Below are some highlights:
So why do we "procrastinate" - look to science for evidence that sheds light on this failure to act, it is what researchers call the “implementation gap.”
"Science tells us that people are able to be rational but only to a limited degree,” says Michelle Hilscher, Ph.D., Director at BEworks and Senior Advisor. According to Michelle,
- We have time limits and limits on our energy and willpower to start and follow through on tasks and plans.
- We develop mental shortcuts to support decision-making. Take a straightforward decision like what size of coffee to choose. Our mental shortcut may be, ‘I choose what the person with me is choosing’ or ‘I’ll do what I usually do.’
- If I tend to rely on my usual decision, the status quo, it might help me in my coffee choices, but it’s not so helpful when it comes to getting started on financial planning.
- Organizations and individuals trying to motivate people to act often rely on strategies that seem logical, but which don’t work – for example, giving them more information or highlighting the negative consequences of not acting. These strategies have limited efficacy because they don’t consider how we operate as humans with brains that take shortcuts to make decisions.
Applying behavioural finance to real-world situations
“As a consumer, when you walk into the door to have a conversation with a Certified Financial Planner® professional, you bring with you many biases and access to mental shortcuts that promote unconscious decision-making,” says Michelle.
These mental habits make the implementation gap likely, no matter what your financial planner says or what the financial plan contains, she says. The more that both the client and the financial planner understand these biases, the more options they have for overcoming them.
Here are two behavioural tendencies that could be holding you back, and strategies for overcoming them:
1. Satisficing
"Satisficing” combines the terms “satisfy” and “suffice.” It describes our common tendency to feel satisfied with ourselves for taking one step towards a goal and then lose energy for taking more substantial action. For example, you go to a meeting with a professional financial planner and you feel you have done enough, or you receive the plan and you are now justified in your own mind to not do anything else. “Satisficing” dampens your motivation.
Building an implementation plan can help you to overcome this effect of satisficing. Having a clear picture of the steps you need to take to put the plan into effect, and building out a concrete plan for accomplishing the first step, can get you moving on your plan. Implementation plans have been shown to successfully increase action in a number of different areas. For example, in one study of voting behavior, participants who made a plan of when, where and how they would vote increased their voter turnout by 10 per cent, compared to a standard encouragement call.
2. Reciprocity
A lot of research has been done into the social relationship between financial planners and their clients, and reciprocity is a big factor. As a client, you want to validate the financial planner’s advice and show that you support their efforts on your behalf. This can lead you to remain silent when you don’t understand the advice; you may feel that questions might disrupt the relationship and signal that you don’t think the planner is doing a good job.
One behavioural science tactic that can help to counteract the pressure imposed by reciprocity is pre-commitment: write your questions out and share them with your planner before you meet with them. This will prevent you from feeling like you are questioning their expertise or recommendations. This also pre-commits both of you to talk about the issues that matter most to you
By keeping these concepts in mind when working with your financial planner, you can overcome barriers and get on track toward reaching your financial goals.
Source: https://www.financialplanningforcanadians.ca/financial-planning/why-do-we-procrastinate-on-building-a-financial-plan
Be Prepared
Here's How to Prepare Financially During the Second Wave of COVID-19
So, what’s the best way to prepare financially?
1. Government Help
Educate yourself about the assistance programs available from both the federal and provincial governments to help people who have been hit by reduced wages or unemployment. Figure out now what you’d qualify for in the event of a second wave, and keep a close eye on any new government announcements that could offer further relief.
A list of key government supports in each province is available here.
2. Rein in Your Spending
Now is the time to save, not spend. An emergency fund, wise under normal circumstances, is even more critical now. Emergency savings will also help you avoid the temptation to tap your RRSPs prematurely, which could have major tax repercussions immediately and impact your lifestyle when you’re older.
3. Shore Up Your Personal Balance Sheet
It’s possible you might need to borrow money to make ends meet if you lose your job, are laid off or have your hours reduced due to a second wave. So, consider applying for a personal line of credit, or a home equity credit line if you own a house. Interest rates are very low, making these vehicles attractive to borrowers, but make sure you consider your entire financial situation before signing on the dotted line. Credit line debt might not be as pricey as credit cards, but it’s still debt, after all.
4. Talk To Your Bank
Many financial institutions responded to the pandemic by offering their customers various options for payment deferrals (on mortgages, for instance). Others might be open to renegotiating debt with customers who are struggling with their finances because of the impact of the virus. If you’re carrying credit card debt or any other personal financial obligation, at minimum, you should give your bank a call and ask about what’s possible. Even if a deferral isn’t an option, there may be ways to restructure your debt into more manageable payments — but you won’t know unless you ask.
5. Take Advantage of Reduced Costs… To Save More
If you’ve been fortunate enough to remain fully employed during the pandemic, you may have actually benefited financially in terms of reduced living costs. You may be saving a lot in commuting costs or less leisure spending, for example. So, this could be the perfect time to boost your RRSP contributions, which will also help lower your tax burden for 2020. Tax-Free Savings Accounts, or TFSAs, offer another tax-advantaged option for saving extra dollars and come with lots of flexibility in terms of where your savings can be invested.
6. Talk To A Financial Planner
A financial planner can help you tend to your financial well-being, which ultimately benefits both our mental and physical health.
Health and wealth are intertwined. We visit doctors when we’re ill; we invest in workout equipment or personal trainers when we want to get in shape. We should look at our finances exactly the same way.
A national survey by FP Canada™ has shown that nearly one-in-four Canadians have difficulties talking about money, but now is the time to be open and transparent about our financial struggles and talk to a Certified Financial Planner® professional or Qualified Associate Financial Planner™ professional.
Without a doubt, COVID-19 represents an extremely challenging crisis for everyone. Canadians should hope for the best but prepare for the worst by being as responsible and prudent as possible when it comes to money.
If you want to learn more, contact our Wealth Management team today.
Source https://www.financialplanningforcanadians.ca/articles/prepare-financially-for-second-wave-covid-19
On April 16, 2024, the Deputy Prime Minister and Finance Minister, the Honourable Chrystia Freeland, presented Budget 2024 – Fairness for Every Generation , to the House of Commons. No changes were made to personal or corporate tax rates. Some highlights include: A. Personal Measures Increase to the capital gains inclusion rate to 2/3, however individuals will retain the 1/2 inclusion rate on the first $250,000 of capital gains annually. Increase to the lifetime maximum capital gains exemption, and two new incentives on specific types of business sales. Modifications to the proposed amendments to focus the alternative minimum tax regime on high-income individuals. B. Business Measures Canada carbon rebate for small businesses that will begin by delivering payments to eligible CCPCs for five years of carbon tax. Accelerated capital cost allowance on purpose-built residential rental properties. Immediate expensing of certain productivity-enhancing assets, including computer hardware, acquired on or after April 16, 2024. C. International Measures Crypto-asset reporting framework that will require annual reporting by crypto-asset service providers on their clients’ activities using these assets.
On April 5, 2024, an unprecedented fine was levied towards a corporation and its director for violation of the Occupational Health and Safety Act . The corporation was fined $600,000 and the director was fined $80,000, plus a 25% victim surcharge. These are highest fines levied both towards a corporation, and to an individual for a single charge in Canadian history, and is further evidence that governing bodies are serious about enforcing legislation to protect workers and prevent further fatalities and injuries. What can we learn from this? 1. Chemical handling protocols are critical for reducing risk in the workplace. In this case, diesel fuel and gasoline were unintentionally mixed, causing an increased flammable hazard. Ultimately, this mistake resulted in catastrophic explosions and fires that caused the death of 6 people and serious injury of another. 2. Directors are being held increasingly accountable for the workers under their care; specifically, for oversight of middle management/supervisors and ensuring hazards are identified and controlled. While consistent with their legislated duties under the Act, historically directors have not been the target of large fines and charges. Instead, the penalties were previously levied toward front line supervisors and staff. This reflects the growing understanding that senior directors have the most accountability for the workplace and workers, and that they have a duty to know what is happening in their organization. 3. Senior leaders need to have open communication and trust with their workforce to ensure candid and frequent flow of information. Leaders won’t know what is happening, and therefore cannot take action to address risk if the workforce is fearful or apprehensive about reporting their concerns. Consider who in your workplace provides this information and to whom. If you are a leader, what questions should you be asking and what to you need to know? Do you believe that staff are open and honest, without fear of repercussions when delivering bad news? Is there a clear and accessible process for reporting, tracking, and resolving issues? 4. Workplace culture is built from the top. Leaders are responsible for establishing systems and structures that support a culture that prioritizes worker safety. Blame-centered culture reinforces our natural instinct of self preservation over disclosure; silence and secrecy over candor and open communication. Also, actions mean more than words. Leaders need to ensure actions and directives echo policy statements, and vice versa. So, what can you do? Ensure that you have an environment where staff feel comfortable reporting issues, where supervisors and managers appreciate staff input and take action to address these concerns. Having little or no reported concerns is a red flag and is a prime indicator that staff do not understand or feel comfortable reporting issues. Ensure that staff are trained about the specific tasks and hazards in your workplace, not just general safety measures, and equip supervisors and managers with the tools and knowledge they need to be successful and manage the workers under their care. To read more about the incident, the Ministry of Labour, Labour, Immigration, Training and Skills Development has published a court bulletin: https://news.ontario.ca/mlitsd/en For any assistance or answers about how you can bolster your health and safety systems and due diligence, contact our resident safety expert Jennifer Goertzen, CRSP .
As we near the end of Tax Season, please note our office hours below: Hours until April 29th Monday – Friday 8:30am – 5:30pm Thursday evenings 6:30pm – 8:00pm (closed from 5:30pm- 6:30pm) Saturdays 9:00am – 12:00pm Hours on April 30th 8:30am – 5:00pm Hours May 1st – May 3rd Closed Hours beginning May 6th Monday – Thursday 8:30am – 5:00pm Friday 8:30am – 4:30pm
