How to disaster-proof your finances — so the next time crisis hits, you’re ready

Three months ago, Jennifer Fleischer’s life was humming along beautifully. Active Kids Zone, the North York birthday party and day camp business she and her husband, Arie, own, was beginning its March Break camps and heading into its busy season, and her two daughters were finishing up the school year.

Then, disaster struck as Ontario went into lockdown. The camps ended abruptly and booking for May and for her busiest month, June, were cancelled. Suddenly, there was no income flowing.

“A pandemic isn’t something you can prepare for,” said Fleischer, 45, disconsolately. “I couldn’t have imagined my business being shut down for three months or more. May through August are our busiest months, so the last two months have been torture.

“The only upside has been the family time,” Fleischer said. “The world usually revolves around the business, so it has been nice to have family time that doesn’t involve going to the office.”

Luckily, Fleischer’s commercial landlord gave her a break on rent and government wage subsidies for small businesses allowed her and her husband to draw small salaries, but it’s certainly not business — or life — as usual for the Thornhill family. Luckily, they have a line of credit that has helped them get by, and they are optimistic that camps will be allowed to operate in July and August. She and her husband faithfully watch the daily press conferences held by the prime minister and the premier “waiting for good news.”

The Fleischers aren’t alone in hoping that the Ontario economy will continue to open up. Thousands of Ontarians are living on credit, government benefits or wage subsidies while their industries are paused, wondering when life will edge closer to what they consider normal.

Those in the personal finance industry, however, have another concern. They want to encourage people to take steps to disaster-proof their finances so they aren’t caught unaware when another crisis emerges.

“This is an unprecedented situation,” said Cynthia Kett, a principal at Stewart & Kett Financial Advisors in Toronto. “There hasn’t been anything other than the world wars that has affected people everywhere.”

Kett says everyone should have a good idea of their annual spending on a month-by-month basis, and if they don’t, “It’s not bad to have people think about things they should have thought about before.”

She says that creating an emergency fund — the money needed to cover their needs for three to six months — is a necessity, not an option.

“Even if you’re not earning a lot, it’s not a question of can you protect yourself — you must.”

Kett advocates having access to credit that you can tap into in the short run, especially if the stock market takes a nosedive, as it did during the initial stages of COVID-19.

“This is helpful if it’s not a desirable time to cash out your assets,” Kett said. “It doubles the pain if you need to sell investments when their value is at a low point.”

Kelley Keehn, author of “Talk Money to Me,” agrees that the first steps people take once they are earning money again are to rebuild their emergency fund and obtain access to a line of credit.

“Those dollars need to be there and to be accessible, not invested in an RRSP,” Keehn said. “I know there is a temptation to take all that money and have it make money, so you should also have access to low-interest-rate credit, such as a line of credit. You should have it set up and waiting; when you have no income, that’s not the time to obtain one.”

Of course, Keehn notes, if you’re the type of person who can’t resist using available credit for luxury purchases or travel, you’re better off avoiding the temptation of a line of credit and keeping your emergency fund handy in a low-interest savings account.

In addition, it may be time to take out life insurance, make sure your will is in order and designate a power of attorney, in case you are too ill to make decisions.

“A power of attorney is important financially,” Keehn said. “What if your loved ones can’t get to the hospital for your signature? Even a joint account may not save you.”

Kett agrees that estate planning is invaluable.

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“Most of us don’t like to think something awful will happen to us, but in the interest of looking after our families, we have to consider it,” Kett said. “A lot of people have had unexpected deaths in the family during the pandemic.”

Finally, says Keehn, this may be the time to engage the services of a financial professional, whether it’s a non-profit credit counsellor or a certified financial planner. Reviewing your investments with them makes sense after the stock market’s pandemic turmoil.

“They’re here to help you figure things out,” she said. “Even if you already have a financial plan, it won’t be the same going forward after COVID-19.”

Elaine Smith

TORONTO STAR

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