Tips for budgeting during a pandemic
May 8, 2020 | 25:10 minutes | Episode 2
This podcast is for your education purposes only and should not be taken as financial advice. Talk directly to a licensed financial advisor to get help with your finances.
Learn tactics for personal and family budgeting during a pandemic.
This is an interview with Nicolas Samaan – a PlanRight® Regional Leader at Manulife.
Nicolas Samaan discusses:
- (3:30) What are some of the top money concerns?
- (4:10) Money out versus money in
- (6:20) How important is it to have a financial advisor?
- (8:45) Tips for creating a budget
- (11:30) Wants versus needs
- (16:45) What government programs are available?
- (19:05) Saving: How to prepare for the future
- (21:25) Investing in the current climate
Meet our guest
Nicolas Samaan is a PlanRight Regional Leader at Manulife. He has spent close to 20 years working in the financial services industry and holds his financial planning, insurance and group annuity insurance licenses. He graduated with a degree in Economics and Management from the McGill University. When he isn’t working, he enjoys spending time at home with his wife and kids.
PlanRight® Advisors are fully licensed financial advisors that can help eligible Manulife Group Retirement Solutions members get the most from their group savings program and make financial decisions for life’s big and little moments.
Hello everyone and welcome to Sharing Humanity – a podcast produced by Manulife to help Canadians stay mentally, physically and financially healthy during the COVID-19 pandemic.
My name is Greg Bisch from Manulife – and today we’re focused on personal and family budgeting during a pandemic.
The information in this podcast is for your education only and should not be taken as financial advice – for that, you need to talk directly to a licensed financial advisor to get help with your finances.
Joining me today is Nicolas Samaan, a licensed financial advisor with almost 20 years experience in the financial industry, and a regional leader of PlanRight advisors at Manulife.
So welcome, Nicholas.
How are you?
I'm doing great, how are you?
I'm doing great.
Thank you very much for joining sharing humanity today.
Now in preparation for this interview, we connected a few times and I realize that our previous episode about parenting while working from home might be applicable to you.
Yes, it is extremely.
I have a 2-year-old daughter and a 5-year-old son who are working with me from home for the last 7 weeks now while my wife is one of the frontline workers in the local hospital next to our house.
So, it's been challenging to say the least.
Yeah, that's that is very challenging now.
I've gotta admit when I saw you there, you’re one of the calmest parents that I’ve seen – throughout this process – as your kids were playing in the background, it was impressive to see.
So how have you been managing it?
Actually, it’s a pretty set schedule.
Every morning they wake up around the same time we eat breakfast we get dressed we will walk our dog altogether, so sometimes they'll do biking or use the stroller so we walk until maybe 9:00 o'clock.
Then I have to work, so I put him in front of the TV for a little while and they do like a 9:00 to 10:30ish. Then I play around with them and I will look at emails while preparing their lunch.
And my real, I would say work starts from 1 to 3 when they both nap because I have that amazing luxury that they both nap. From 1 to 3 is the key moment of my day where I can actually work. And then I when they're going to bed at night, I tend to look again and work.
So, it's a balancing act. But I think what's important here is to figure out that everybody is healthy or everybody is good. It's a silver lining in this whole situation is that I get to spend time with them.
The most that I can and try I try to make the best of it, but I'm not going to be crafty so. Colouring and playdough - that's where my knowledge stops so, it’s entertaining them.
I found that often with my son and daughter that they come up with the creative ideas on their own and they kind of drag you along after a while.
Well, you seem to be handling it very calmly and, a heartfelt thanks from everyone to your wife who's on the front lines.
So today we're talking about personal budgets, and I guess a good way to start would be: What are some of the top money concerns you're hearing from people right now?
Well, the major one has been – where is my money going to come from, right? I think you would be having to live under a rock if you haven't heard about the amount of people that either lost unfortunately their job or have been put on temporary leave.
I believe the requests for unemployment have skyrocketed over a million and the last few weeks and months. So, it's pretty bad.
So, a lot of people their first question, their first concern when they talk to one of our advisors is where is money really going to come from.
And for a lot of people, I think that the word like we said we're going to talk about budget, and I'm sure most people start to cringe like argh budget.
It doesn't have to be in a negative way, right? The budget is very simple. It's what's coming in and what's going out. And I think a lot of people do 80% of their expenses or something like that. They know what they are, right? They can tell you what their hydro bill or their mortgage or the rent is – so they know that.
And they absolutely know how much money is coming in. But in these situations where all that has been sort of slowly thrown out the window.
It becomes a good idea to sit down and take some time just to review where everything is going.
That absolutely makes sense. It's a very simple concept, but I know from doing that with my own with my own family and doing that with my wife that it can be a difficult process and can bring up a lot of tension.
Yes, 100% in you're absolutely right, and usually the issues are rarely with the money coming in. It's usually with the money coming out. So under normal case people would have their regular income coming in every week, every two weeks, every month right? Everybody gets paid differently, so they have their money. They know exactly usually how much they're getting. Unless you're self-employed, it could have some change there. Usually you know how much they're getting in.
Right now, what’s throwing a lot of people off is the fact that there that guarantee-ish like feeling of getting income every two weeks or knowing exactly how much are getting has been thrown out.
And now you have to rely on either your savings… on government programs … so, you're probably not receiving the same amount of money that you were getting before, and that is adding a lot of stress to it
I know let's say that you are having issues with payments on your mortgage. I believe that a lot of institutions are helping people out by deferring some payments, and so that's why it's so important to really talk to your lenders to your advisor if you have one – that's the key, I think is to know that you're not alone and you should seek to get that financial help.
How important is it to have financial help like a financial advisor right now?
Now more than ever and I think it's the same concept as a as a physician, right? I've always said it. Health and wealth go hand in hand and in a perfect world everybody should have a family doctor they can rely on and meet at least once a year to review their health.
It's pretty much the same concept here where you want to have your financial doctor reviewing your situation. There are certain moments in life where you probably will need or seek some guidance.
I call them life events or life moments.
Usually, it's when you start a new job, let's say or you have the birth of a child, the death of a loved one, a change in income like we have right now.
So, there are certain situations where you need certain assistance or help when those things happen.
So, I think that it's in a perfect world I would love for everybody to have their own sort of financial planner to help them and guide them and give them that assistance. So, that people can maximize their pension plans or their savings, or their loans or anything like that so that people are better off in the end because it has a big impact.
Unfortunately, a lot of people will have a lot of debt and it's consumer debt or sometimes it's mortgage and it can put some stress on them which will impact their family life, their health and so it extremely interrelated. Those two aspects.
So now I can to give a short answer to your question - I think now more than ever, and even after that, I truly hope that people will try to seek that financial advice to be able to help them either continue on the right path or get back on the right path so that they can live better lives.
You brought up a lot of really interesting points there. There is a connection between financial health and physical health and mental health, and Manulife has done some has supported some research on that, so I'm going to make a note for myself here to put that in the show notes of the podcast. So, people can take a look at that.
So, I just want to talk a little bit about budget.
Some people, it might be the first time really creating, like sitting down and officially creating a budget.
What should that look like? Do you have any tips for how they get started doing that? Like, should they open up an Excel spreadsheet and start plugging everything in?
What are some of the tips for that?
So, it really depends on the individual, on the couple – what they like.
I'm going to give you a few examples of what people can do.
Some people will use a very simple piece of paper and they'll just break it down – split the piece of paper in 2. One side will be what's going in. The other – what’s going out.
Some people know exactly their expenses are - they don't have a lot.
Some people like you said will go on an Excel spreadsheet and they'll really detail everything for a week per month per year and the correlate everything and funny as it may seem, there are a lot of tools online –
that offer budgeting tools like one like I know that Service Canada has one, most financial institutions now offer fillable budgeting tools.
So, there are many, many, many options that are that are there. So, I think the first step for a lot of people, and I say this jokingly is either do it in the morning with the coffee or at night with a glass of wine.
It depends on what type of result you're looking for.
So, but I think the key usually like I said that the easiest point to start is with what's coming in.
So, if you're a single person, then it is your net income so you always use your net income, which is the income that is deposited in your bank account.
I always love to talk to people when you talk to them because if you ask him for gross income, which is before tax, I call it sometimes the income that you sign on your offer letter, versus the income that you get on your in your pay stub – it’s not the same because you have many deductions like government deductions, taxes, pension plans. If you have them, or group benefits, so it can go by fast even though those will give you some savings
You want to always use you for your expenses – your net income. Because that's what you're going to use to go buy your groceries, pay your mortgage or pay your rent or anything like that.
It's pretty easy to determine that amount.
Some people will have investment accounts, so they want to put in the income that they get from those. Some have non-registered accounts or savings account or allocations from the government – you want to put those in as well – because it is income that you're going to get.
When you look at the expenses, so where the money is going, there are technically two types of expenses that I see: there are your wants and there are your needs.
For certain people: what is a want, what is a need is very different, right?
So, we need usually to have a roof of are ahead. We need heat in our home. We need to eat.
I want to have a brand new $500 jacket. I have one but I want one and that's a very big difference, right? For certain people that tell me they need to have a vacation – once or twice a year, and I totally understand it.
Like I said at the beginning, I have two kids I want to spend time with them. I do need to take vacation so I do want it and at the same time I need it.
Now, the question comes into play is how much am I willing to spend on that vacation? Because it's skies the limit.
So, it's really important to see then needs and the needs usually are usually pretty simple to calculate because they're fixed.
They could be your mortgage or your rent. Usually that’s the same amount [every month] and that doesn’t really change that often.
Your hydro bill or your telecommunications bill, or your water taxes. That's pretty much set every month.
It's rare that it's going to change drastically – so usually you know where those are.
So, when I was meeting with clients in the past and I ask them how much was there there telecommunications bill? They knew it right away like it's X amount of dollars, so it's pretty straightforward.
When it becomes slightly more complicated and this is where a lot of people stop their budgeting exercise, is when they go to entertainment or hair or those – I don't want to say frivolous – but those wants. Right?
Do they stop it there just because they're nervous about what that means?
It could be there nervous that will figure out the amount of money that we're spending on it. It could be the fact that it just becomes too tedious. Because it's hard to figure out.
Do you take your bank statements? Do you look at every single transaction? Do you guesstimate it right so I can give you an example:
When I get my haircut, I know how much it cost me. If I go every four weeks every six weeks, it depends, so it's hard to say well I'm going to spend $100 on hair.
For certain expenses it's more difficult. I’m not a big movie goer.
When I go, I go because I’ve got points, right, got certificates or stuff like that, so it's hard sometimes to figure out what is the definition of entertainment.
What is the definition of a restaurant? So, if I say I want to budget or I think I'm going to spend $100 and restaurant, does it count lunches if I go grab a quick sandwich at lunch?
So that's where it becomes a lot more complicated for certain people and they just lose the interest.
Yeah, it can be painful going through that process. I've gone through that process and it's difficult. And then once you set a budget, it's difficult to stick to it as well.
Yes, and that's why it's so hard to do it because it's not static. It should always be evolving.
So that's why a lot of financial institution, what they've done is with your credit card statement now – they break it down for you.
And there's different websites where you can plug in your information and they'll pull up the data and they'll create that budget for you.
That rolling 12 months, right? So it's pretty interesting how you can actually see your habits.
So by using let's say your credit card to do your purchase and paid in full every month, you were able to see: oh, I spend X amount in this or oh, I spend X amount in entertainment.
Because if you have recurring bill of those streaming services that exist, well, there are going to reoccur every month on your credit card.
So it's easy to say: Oh, I spent $9 on this or I spend X amount on streaming for that, so it's an easier way if everything goes out of one place that you can sort of, follow up with what those are.
So, it sort of helps out that budgeting experience, but there's no real defining tool to use.
I think what's important to know is: what are your needs, what you need to spend money on. And then with the remainder is: how do you want to allocate it? And that is where those conversations are a whole lot harder.
Do I want to spend X amount of this car or should I spend $20,000 in this car, right?
So that’s where the harder decision is – and that's where the advice comes in, because I'm not here to tell everybody to get one type of car another. Every case is different, every situation is different. Every person, every couple is different.
And so that's another opportunity to use your financial advisor to help out with your particular situation?
Because there are people who have lost their part or all of their income.
I want to talk about what are some of the government programs that are out there right now?
So, there are actually quite a few programs that exist right now.
There are the federal programs that have been done by Canada, and there are also different programs that have been created by provinces.
As this podcast is across the entire country, I don't really want to focus on every single province because it will become pretty complicated.
But, if we're going for the general federal one – the Canada emergency one that was recently launched, so it is good for the next four months.
It gives roughly about $2000.00 for people to be able to receive, and I think it's interesting.
I think it's important to point out that this podcast is being recorded on May the 1st 2020.
So, that’s where it is right now. The government plans are continuously changing.
However, if listeners want to go to manulife.ca – there's a COVID-19 page that is easy to navigate to within that site. There's an “updates for individuals section” and in there you can find a link to a ton of the government programs that are available federally and for each province. So, I just want to throw that out there and I'll put that in the show notes as well.
Absolutely because that is probably one of the biggest first resources that you'll have.
Then you'll have different resources depending if you are retired.
If you are a student. If you are an employee or were an employee. If you are self employed.
I sometimes feel that everyday something new is coming out its announcement after announcement after announcement.
So, there's so many different ones and this is where once again I'm going to sound like a broken record. This is where the advice part is so key. I don't expect everybody to know them by heart. Even I don't know them by heart, but I have a reference material sheet because there's no way to remember every single announcement that happened.
It would be impossible, there's dozens and dozens of them.
If people are struggling right now – what if this lasts a long time? What are some of the things people can be doing right now to prepare – if that is the case?
I want to make sure that I'm going to answer your question two fold. I don’t know you're talking to me about the investment side of it, or if you're talking more on the budgeting daily, type of question, but I'll try to answer.
Let’s try to answer both if you don't mind tackling them. Does the budget makes sense to do first?
Yes, absolutely, no problem.
So, right now what we know is that the governments programs are set for maybe three or four months, right? So, this probably brings us till the mid to late summer.
So, I cannot speak for the government. But, I would be surprised if after all this, if this is keeps on going and going and going, they wouldn't have some continuation of the programs.
But I cannot say what it is and I'm not saying that it's going to happen.
And so, just to reiterate, again, we are at May 1st 2020 right now.
So, we're talking with that with that level of knowledge.
If you are currently still working and you're working from home probably or you're working in a frontline type of work or you have to go to the office or work and you can keep on working then continue to do what you can.
If you have to put money in your savings plan, I would definitely keep doing it.
Because you've been doing it and you probably haven't noticed it.
And I'm going to move on to the other side is because you are getting paid once twice, or four times a month – you're doing what we called dollar cost averaging, which means that you're going to buy your investments at different moments in time.
And since the market has been extremely wobbly in the last few weeks and months, while you've been purchasing investments at different times, instead of trying to time exactly when you're doing it. So, by doing that constantly it creates an average, which is probably better in these situations.
So if you can – it makes sense to keep on saving if you have disposable income. If you do not – you’d likely want to focus on paying your rent, your mortgage – and having food on the table.
That makes a lot of sense. And how about the investment side?
So, the investment side that's the hardest part because we really don't know what's going to happen.
We've seen things that we haven't seen in years or probably ever.
If you are not expecting to use the money or putting aside in a short period of time.
By putting aside you mean putting aside into investments.
So, savings for retirement or savings for an emergency fund or saving for any reason. If you're not planning on using it for the next, say five years, then you keep looking at your time horizon and you keep looking at your investor profile.
That's the bare basics. We always look at those two components.
How long do you have until you start drawing that money? And what is your risk level?
So, when it comes to time horizon for a lot of people, if you are 20 years old today and you're working for a company where you have a pension plan and you're saving for your retirement, there's not a lot of things you can do right now.
You just have to truck along and you're not going to use this money for another 40 years.
It's really that people that are in that threshold of: I'm close to starting to draw this money.
So, if I'm close to retirement, if I'm close to buying a house and I want to do a home buyers plan – that's where I'm talking about people, not necessarily an age, it’s the moment I'm using this money.
Your vision should be very different. You really want to be safer.
You have to make the decisions where you're comfortable.
So, this is where that advice comes in right? Or the goal of the advisor is to analyze and assess, with you, your horizon, to analyze and assess your investor profile.
So, where do you fit? Are you conservative, a moderate, aggressive type of investor? By asking you questions. Then it is the advisor’s job to make a recommendation.
So, it's the same concept as a doctor: OK, well you want to run a marathon. OK, well with how is your blood pressure, how’s this, how’s that? Have you ever done something like that before?
And then they'll give you a course of action. Same thing with the trainer – so that's why it's so important to have that relationship.
Yeah, I think that's important to point out because that's why you're not trying to give advice for individuals here because there's such a variety of different scenarios.
And different preferences that you can't really do that and why it's so important to have a financial adviser.
Yeah, thank you very very much for all of this Nicolas.
I really appreciate your time.
Might have you back again because you have a lot of knowledge that I think you can share to the listings of the podcast and so thank you and good luck with parenting through this isolation period.
Yeah, it should be, no, it's going to be good and thank you for having me and thank you for everybody that it that I've been listening to this podcast.
As of May 1st, I'm going to wish you be safe.
Be there for your family. Family comes always first. Always think about that.
So hopefully we'll meet again in a future podcast.
Yeah, hopefully and thank you very much for that Nicolas.
Thank you. Bye bye.
Thank you for listening to the Sharing Humanity podcast. Remember, contact a licensed financial advisor if you need help with your money.
Also, for more important and useful information during this time, check out our coronavirus page at Manulife.ca.