What are your financial priorities? With change and uncertainty still ahead, what do you need to focus on to feel confident about keeping you financial goals on track?
We posed these questions to Jordan Damiani, Meridian Senior Wealth Advisor and Investment Advisor with Credential Securities (Grimsby and St. Catharines). This is what he has to say about what financial resilience means, why it’s so important right now, and the five key steps you can take to build your financial resilience.
Can you define financial resilience for us?
For me, financial resilience is the confidence and peace of mind that comes from knowing you can achieve your financial goals and sustain your lifestyle despite the curve balls life throws at you. You can pay your bills. You have a savings plan in place for the future. And you're comfortable with where you are in the present moment.
Why has financial resilience been so important?
The events surrounding the COVID-19 pandemic – lockdowns, job losses and the rethinking of entire industries – have shown us the fragility in how people structure their finances. People who lost jobs and didn’t have income for several months took on the added stress of figuring out how to pay bills - racking up credit card debt or borrowing from friends or family. Resilience is so critical for managing the unexpected. When COVID-19 hit Ontario and the shutdown was declared, all of our lives changed - sometimes drastically - in a short period of time. People who planned ahead and had savings to rely on had one less stressor during a very stressful time.
What kinds of conversations have you been having with Members in the past several months?
The importance of financial planning has been one of the key themes. Members who planned well - had contingencies in place or were living within their means - have weathered the pandemic fairly comfortably so far. This past year has also reinforced the importance of individual planning. Everyone is different, and unplanned events or emergencies affect everyone in different ways. Having the support of a financial planner can help to alleviate volatility, unpleasantness and stress during difficult times.
I’ve spent a lot of time on video calls with Members, and our relationships got much stronger because they found our conversations informative and comforting. Ultimately, coming together in a time of crisis built trust and confidence for all of us.
How can someone build their financial resilience?
There are five key steps to building financial resilience:
1. Financial self-awareness
Take an inventory of your present situation. How much do you make? How much do you spend? What do you spend your money on? Putting your spending into categories is usually an eye-opening exercise because you may not be aware of how much you spend on certain things. Once you know where your money is going, you can make more informed decisions about spending and saving. I often recommend a pre-authorized saving plan based on a person’s goals. As long as you aren’t accumulating credit card debt, you can track the plan and gauge your progress.
2. Financial knowledge and informed decisions
It’s helpful to have someone who can advise you or guide you to resources and information. I have a few resources that I typically recommend, including Meridian’s Good Sense blog, which offers great educational content on investing and finances. As a financial planner, increasing the financial literacy of my Members is one of my primary goals. This requires partnership between a Member and advisor - working toward more than financial goals.
3. Build a plan
Financial planning should be goal-based - and goals vary, of course. They might relate to a specific moment in time (like paying for a child’s education) or span a longer time (like managing retirement, taxes, or estate-planning). It really depends on where you are in your life. For example, younger investors might focus on repaying debt, saving for a down payment, qualifying for a mortgage, or leveraging the first time homebuyer’s RRSP exemption.
Experienced advisors will explore your plans, needs, and goals through conversations that allow you to be honest about your money, habits, worries, and dreams. Once we have a good grasp of that, we can create a plan that’s focuses on your goals but is still adaptable - this will help build resilience and give you the freedom to adjust your plan as your life changes.
4. Emotional strength
Financial resilience is the foundation for financial security. When you have a good understanding of your finances and confidence in your plan, unexpected events won’t derail you. Working from this baseline of financial resilience can help you achieve financial security, which has a significant impact on your confidence and outlook. It’s easier to feel optimistic about the future when you know that you can pursue your passions without worrying that one event could throw your life off-track.
5. Be proactive
Understanding your finances and starting to save when you're young are the two most important things anyone can do to build wealth and financial resilience. Starting to save earlier eliminates the panic of getting up-to-speed later in life and gives you more time to learn about finances. Plus, the longer you’re invested the more you’ll save.
So starting younger, with an affordable amount, provides a better foundation to build your wealth. I also think it’s important to note that people have misconceptions about the word “wealth”. Wealth is relative - it’s not a number, it’s about your goals and lifestyle. If you save and invest, you have wealth. Investing even a small amount regularly can impact your future significantly.
What advice do you have for people going forward?
Don’t be discouraged. If you’ve been getting through the pandemic by doing your best and not accumulating a lot of debt, one year off track won’t significantly impact your overall financial plan. And remember, talk to your advisor about your concerns. We’re here to help.
Talk to an advisor
Financial resilience is key to your confidence and security - and one of our expert advisors can help you get started. After all, at Meridian we strive to be a place where investing feels good.
A previous version of this post was published November 12, 2020.
Mutual funds, other securities and securities related financial planning services are offered through Credential Securities, a division of Credential Qtrade Securities Inc. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This article is provided as a general source of information and should not be considered personal investment advice or a solicitation to buy or sell any mutual funds and other securities. Credential Securities is a registered mark owned by Aviso Wealth Inc.