2020 —The Year Your Financial Plan Was Tested

By  Derek Condon

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2020 has been filled with uncertainty so far, so I’m assuming that might continue to be the way it goes the rest of the way. It’s a year no one could have predicted, but at the same time, it’s the kind of year we all plan for.

Hope for the best, but plan for the worst. 

Almost everyone, in one way or another, has been impacted by COVID-19. A lot of people were temporarily laid off, lost their jobs completely, changed roles, or are working from home, just to name a few. 2020 is going to be a year that we look back on for a long time to come.

As a Financial Planner, it’s the kind of year we dread to see, but advise our clients to plan for. Suggesting or planning things like living within your means, sticking to a budget, having an emergency fund, having liquid investments as a last resort, and having proper insurance and safeguards in place. Again, it’s a year we hope we don’t see, but we know we will at some point, and it’s far better to be prepared than not.

During the past year, it’s either shown the strengths or weaknesses in your financial plan, assuming you have a plan at all. Let’s take a look at some of the ways your financial situation could have been impacted, and how you can work to pick up the pieces.


Here in Canada, a lot of people had to lean on CERB, a government financial relief program. The program gave applicants a taxable $500 a week, which works out to a salary of $12.50 an hour, based on a 40 hour workweek.

If you lost your job or had your income impacted by COVID-19, you were now making $12.50 an hour instead of your typical income. I imagine this is a huge drop off in pay for most people. Obviously, no one could really foresee this happening, and the results of it. But more often than not people live way outside of their means, spending more than they make, and utilizing their credit. The reality is, pandemic or not, we could lose our jobs anytime, no matter how much we love them, or how important we believe we are to the company. Living within your means is important, all of the time.

I remember years ago, a guy I worked with told me that he and his wife bought their house based on one of their salaries. So if anything did happen, financially it wouldn’t be a struggle for them. That has always stayed with me as good advice.

Emergency Fund

If your budget was impacted and you weren’t in a position to pivot, you might have had to dig into your savings, investments, or borrow money (which ends up costing a lot more than the amount you borrow).

Ideally, we would all have an emergency fund. Approximately 3 to 6 months of necessary expenses saved up, and set aside, in a high-interest savings account where we know it won’t drop below what we need. This would allow us to make ends meet without having to borrow money at high costs. Because unexpected expenses do arise, especially if we are homeowners, business owners, or have people who depend on us.

Having the patience and discipline to save up an emergency fund can be tough, but trying to pay bills with money you don’t have is even tougher, and expensive.

Cash to Invest

Experienced investors know it’s always a good idea to have some cash sitting on the sidelines when the markets are becoming overvalued. Markets move in cycles, from lows to highs and back, always average somewhere in the middle.

If we look at the S&P 500, from its low on March 23rd, it had a 60% return to September 2nd. For well-performing portfolios, that’s easily 5 years of returns. For an average portfolio, that could be a decade.

When markets dip, it’s the best time to invest extra capital in order to take advantage of the recovery. Not investing doesn’t cost you anything like not budgeting or having an emergency fund will. But it doesn’t allow you to take advantage to increase your net worth. It doesn’t cost you, but it can limit you.

We all benefit from being better financially. By spending a little bit of time to better understand how markets and finance work, you can save yourself money and make yourself money beyond what’s imaginable. Being better financially is like collecting the rewards of a second full-time job, just without the effort.

I think the best way to use 2020, is to learn from it, so we are better prepared in the future.

Disclaimer: The information in this article is not intended to encourage any lifestyle changes without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.

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