Don't Procrastinate - Be Prepared

So why do we "procrastinate" - look to science for evidence that sheds light on this failure to act, it is what researchers call the “implementation gap.”

"Science tells us that people are able to be rational but only to a limited degree,” says Michelle Hilscher, Ph.D., Director at BEworks and Senior Advisor. According to Michelle, 

• We have time limits and limits on our energy and willpower to start and follow through on tasks and plans.
• We develop mental shortcuts to support decision-making. Take a straightforward decision like what size of coffee to choose. Our mental shortcut may be, ‘I choose what the person with me is choosing’ or ‘I’ll do what I usually do.’
• If I tend to rely on my usual decision, the status quo, it might help me in my coffee choices, but it’s not so helpful when it comes to getting started on financial planning.
• Organizations and individuals trying to motivate people to act often rely on strategies that seem logical, but which don’t work – for example, giving them more information or highlighting the negative consequences of not acting. These strategies have limited efficacy because they don’t consider how we operate as humans with brains that take shortcuts to make decisions.

1. Satisficing

 "Satisficing” combines the terms “satisfy” and “suffice.” It describes our common tendency to feel satisfied with ourselves for taking one step towards a goal and then lose energy for taking more substantial action. For example, you go to a meeting with a professional financial planner and you feel you have done enough, or you receive the plan and you are now justified in your own mind to not do anything else. “Satisficing” dampens your motivation.

Building an implementation plan can help you to overcome this effect of satisficing. Having a clear picture of the steps you need to take to put the plan into effect, and building out a concrete plan for accomplishing the first step, can get you moving on your plan. Implementation plans have been shown to successfully increase action in a number of different areas. For example, in one study of voting behavior, participants who made a plan of when, where and how they would vote increased their voter turnout by 10 per cent, compared to a standard encouragement call.

2. Reciprocity

A lot of research has been done into the social relationship between financial planners and their clients, and reciprocity is a big factor. As a client, you want to validate the financial planner’s advice and show that you support their efforts on your behalf. This can lead you to remain silent when you don’t understand the advice; you may feel that questions might disrupt the relationship and signal that you don’t think the planner is doing a good job.

One behavioural science tactic that can help to counteract the pressure imposed by reciprocity is pre-commitment: write your questions out and share them with your planner before you meet with them. This will prevent you from feeling like you are questioning their expertise or recommendations. This also pre-commits both of you to talk about the issues that matter most to you

By keeping these concepts in mind when working with your financial planner, you can overcome barriers and get on track toward reaching your financial goals.

Source: https://www.financialplanningforcanadians.ca/financial-planning/why-do-we-procrastinate-on-building-a-financial-plan

Here's How to Prepare Financially During the Second Wave of COVID-19

So, what’s the best way to prepare financially?

1. Government Help

Educate yourself about the assistance programs available from both the federal and provincial governments to help people who have been hit by reduced wages or unemployment. Figure out now what you’d qualify for in the event of a second wave, and keep a close eye on any new government announcements that could offer further relief.

A list of key government supports in each province is available here.

2. Rein in Your Spending

Now is the time to save, not spend. An emergency fund, wise under normal circumstances, is even more critical now. Emergency savings will also help you avoid the temptation to tap your RRSPs prematurely, which could have major tax repercussions immediately and impact your lifestyle when you’re older.

3. Shore Up Your Personal Balance Sheet 

It’s possible you might need to borrow money to make ends meet if you lose your job, are laid off or have your hours reduced due to a second wave. So, consider applying for a personal line of credit, or a home equity credit line if you own a house. Interest rates are very low, making these vehicles attractive to borrowers, but make sure you consider your entire financial situation before signing on the dotted line. Credit line debt might not be as pricey as credit cards, but it’s still debt, after all.

4. Talk To Your Bank

Many financial institutions responded to the pandemic by offering their customers various options for payment deferrals (on mortgages, for instance). Others might be open to renegotiating debt with customers who are struggling with their finances because of the impact of the virus. If you’re carrying credit card debt or any other personal financial obligation, at minimum, you should give your bank a call and ask about what’s possible. Even if a deferral isn’t an option, there may be ways to restructure your debt into more manageable payments — but you won’t know unless you ask. 

5. Take Advantage of Reduced Costs… To Save More

If you’ve been fortunate enough to remain fully employed during the pandemic, you may have actually benefited financially in terms of reduced living costs. You may be saving a lot in commuting costs or less leisure spending, for example. So, this could be the perfect time to boost your RRSP contributions, which will also help lower your tax burden for 2020. Tax-Free Savings Accounts, or TFSAs, offer another tax-advantaged option for saving extra dollars and come with lots of flexibility in terms of where your savings can be invested. 

6. Talk To A Financial Planner

A financial planner can help you tend to your financial well-being, which ultimately benefits both our mental and physical health.

Health and wealth are intertwined. We visit doctors when we’re ill; we invest in workout equipment or personal trainers when we want to get in shape. We should look at our finances exactly the same way.

If you want to learn more, contact our Wealth Management team today.

Source https://www.financialplanningforcanadians.ca/articles/prepare-financially-for-second-wave-covid-19