Two significant events have occurred since we flipped our calendars over on January 1st, 2020. We all endured the rigorous Global Pandemic which will have lasting physical, mental and financial effects of all of us and secondly, the ravages of inflation followed by the punishing rise in interest rates.
On the financial front, a plethora of lessons were learned:
- Low rates were NOT normal.
- Nothing lasts forever.
- Inflation is very unpleasant.
- You need an emergency fund.
- Retirees need money set aside for market upheaval.
- It’s easier to ride out an emergency if you’re debt free.
- We don’t need to spend so much.
- You can’t time the market.
- Having a financial plan provides peace of mind.
- Expect the unexpected.
For some people, we’ve seen mortgage payments nearly double. In Canada, food banks are being used more than ever. Given the sharp decline in the number of service jobs being lost in an economy that allowed itself to grow overly dependent on them, household incomes are falling.
As history will show us, the key to a brighter and healthier future is one word – CHANGE. With change comes a degree of sacrifice and change but like any personal trainer or physiotherapist will attest, No Pain, No Gain! Giving up is not a solution or trying to find a simple path of least resistance is no way out either.
Since the eventful moments of 2020, two things have grown in popularity:
- The Bank of Mom and Dad
- Guilt from not spending the rewards of working for one’s lifetime and “Spending my Kids Inheritance” or SKI
We tend to forget how deep rooted the issues of low rates have been in conditioning generations into becoming a consumer driven one. It has had an impact on everyone. Ironically most of the anger gets tossed at “Boomers” and “Generation X” but that is unfair and a false narrative. Instead, it has become a wedge issue used as a tool of guilt to help erase bad habits instead of taking the time to learn from those very mistakes. We now have a unique period to re-educate the masses by pausing and examining points 1-10.
Simply writing cheques or making bank transfers to wipe out unnecessary debts for family, parents, grandparents, aunts, uncles or even siblings run the risk of sacrificing their legacy plans. Those who pause and remember that they also have critical their own retirement plans coupled with intergenerational wealth planning that were intended to secure the futures of their families, may in fact be jeopardizing them by quickly stroking that cheque. It could sacrifice the future of the very people they care about the most.
The value attached to sitting down with a group of qualified individuals dedicated to working with your family is far more profitable vs a hasty money transfer. The risk of repeating a bad habit without learning from a previous mistake is always a possibility. Never pass up the benefit of including that person(s) into a family sit down with a professional for an educational solution experience.
Let’s not pretend that a change in governments will magically improve the economy in one term. Canada needs many changes to regain its global prominence as we have fallen behind on many key competitive economic metrics. That said, as households and families there is nothing stopping us from being steps ahead and less reliant on our elected officials. I guarantee much greater prosperity by following this path of financial independence.
A final takeaway, Mom, Dad, Grandpa, or Grandma, we all are finding out that life gets short quick. Our kids etc. have a much longer runway and hence the ability to fix things with a more generous timeframe. It is “parental” to want to help. Go out and SKI without the burden of guilt, it’s healthy and you deserve it.
