For many, 2020 has been a year to forget, either from a health standpoint, a financial one or both. But, while most of us are ready to put the year behind us, it’s always a good idea to take time to reflect on the good, the bad and the ugly. Joining me this week for a 2020 year in review is Rob Carrick of the Globe and Mail. If you ask me, few Canadians have a better pulse on what’s happening with the finances of average Canadians and the Canadian economy as a whole, which made Rob the perfect guest for this conversation.

Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. This episode of the Maple Money Show is brought to you by Willful. Did you know that 57 percent of Canadian adults don’t have a will? Willful has made it more affordable, convenient and easy for Canadians to create a legal will and power of attorney documents online from the comfort of home. In less than 20 minutes and for a fraction of the price of visiting a lawyer, you can gain peace of mind knowing you’ve put a plan in place to protect your children, pets and loved ones in the event of an emergency. Get started for free at maplemoney.com/willful and use the promo code Maple Money to save 15 percent. Now, let’s chat with Rob…

Tom: Hi, Rob, welcome to the Maple Money Show.

Rob: Thanks, Tom.

Tom: Welcome back, actually, because a year ago you were on the show. For those who want to check that out it’s at maplemoney.com/080. What we did last year at the same time was review the previous year and predict what would happen the next year in 2020. I want to give you some credit right off the bat, because even though you may not have known why this would happen, one of the things you said was that you expected there would be more job loss and insolvencies and to use January to prepare for harder times ahead. First of all, looking back at that, what do you think of your prediction?

Rob: It’s uncanny how I actually thought along the lines of what actually happened. I had no clue about why, but I just thought that the economy was maybe due for a pullback. I thought maybe we’d see that in 2020 but I didn’t dream it would be a pandemic that would cause it. I did sort of have a sense that we were heading for a slowing down. Of course, what’s interesting about 2020 is that we had just about a little of everything. We had a slowing down. We had a stock market crash. We had a historic stock market rally. I’ve never seen a mix of things like we had this year.

Tom: Let’s dig into this past year. I think potentially when it comes to personal finances, one of the bigger issues was around job loss or at least a reduction of hours in some cases. What did you see with all the articles you’ve done about the employment issue in 2020?

Rob: What’s strange about the pandemic and its effect on the economy is that it’s a very two-track thing. There are people who have been financially slammed. They’ve lost jobs. They’ve lost hours, like you said. And then there’s a whole whack of people who were either fine and untouched or have actually done better because of the pandemic. But on the unemployment side, a lot of our sense of how bad this was muted by the federal government pouring money into the hands of individuals and businesses and making sure the economy didn’t bottom out. We may not have a sense of the actual damage to the workforce until into 2021 when some of these programs taper down and people aren’t eligible anymore. And when deferrals of mortgages, credit card payments, and loan payments run out where people aren’t able to negotiate more deferrals. I think 2021 will be where we sort of “tally up” exactly what happened and how much damage there was.

Tom: A couple of thoughts from that… First of all, when you talk about the people that were hit hard with this, I have this sort of avatar image in my head of a single mother that worked at a restaurant, has kids in school—so much would happen in there where you could be losing your job. You could be dealing with kids coming home. Yes, there was the government program but what kind of advice or stories have you heard for someone like this that may have got hit with all these things in 2020?

Rob: What I have heard over and over again is from people who were fortunate enough to be able to have a little bit of money sitting in an emergency fund and we’re so grateful for it. Something I’ve heard is, “I had X number of months of expenses put away and as soon as I’m back on my feet I’m going to have double that. If I did two months, I’m going to go for four.” Somebody said they were thinking that maybe a year’s worth of expenses. Now, it’s easy to say, “Just put an emergency fund together,” but it’s quite another thing to find extra money after you’ve paid all your expenses to do it. We talk about saving for retirement all the time—saving for the long-term, investing for the long-term, but I think we need to put some emphasis on saving for short-term emergencies and expenses as well. Those who were able to do that, even if they burned through the money, it added a layer of security between you and complete uncertainty because you had nothing to rely on.

Tom: You mentioned these government programs. When they were first announced, it seemed very chaotic. They had to act fast. They were making these announcements, tweaking them or expanding them. Even as someone in the personal finance world, I was losing track of what the rules were and how this happened. What were your thoughts—especially back then when they were launching these programs, in trying to keep up as things kept happening?

Rob: I was working overtime to track the programs to see who would be eligible, checking the overlap, checking the ambiguity about who would be eligible. I was getting tons of questions from readers. I’m trying to find the answer to this question, “Am I eligible for this?” I gather a lot of people went ahead that weren’t sure about their eligibility but applied anyway. It was pretty messy. I think it’ll probably take months to track just how messy it was. But on the other hand, it seemed that there was a desire by government to prevent the economy from locking up. And the way to do that was to get the banks to slash interest rates, to start buying government bonds and to start pouring money into the hands of people. It was messy and probably overdone, but in retrospect, when I look back to the chaotic times in March and April, I wonder what could have been done different. If we’d been more careful, maybe it would have taken more months to get into the hands of people. Maybe the unemployment rate would have gone up. Maybe the bankruptcy rate would have gone up. We don’t really know. It was a messy sort of broad-based effort to support the economy so let’s see how the economy rebounds. Let’s see if we’re quicker to get back on our feet because of that or whether there are some negative after effects of all that spending. Maybe the government might find the deficit being worse than we expected causing the government to be more hand-strong about future spending. I think we’ll have plenty of time to do the autopsy on everything that happened. But for now, I understand what they were doing. I’d say it was messy and probably not nearly as efficiently as it could have been but remember what we were up against.

Tom: Yeah, I find myself trying to give politicians as much slack as possible. There’s a lot of second guessing. Like you said with the autopsy idea, that was kind of my thought too. We’ll look back at this in a year from now, five years from now. That’s when we can actually say, “This was right and this was wrong,” and maybe improve for when this happens again in the future.

Rob: We’re going to have years of finger pointing and blame, et cetera. But let’s just postpone that and get out of this. Then we can Segway right into how we’ll do better next time.

Tom: With CERB, especially, I do fully agree that it had to happen. And like you said, maybe it was overdone. My biggest concern (which is starting to come out now) was I thought there could be some eligibility issues. The other thing I still don’t seem to hear a lot talked about is the fact there are taxes due on this. Even for those that are eligible, it seems like kicking the can down the road. If you’re someone that’s been getting CERB, don’t have a job and they cancel this program, you still owe the tax. It seems like things could still get worse.

Rob: Yeah, there’s no doubt about that. I think the 2020 tax returns that people are working on in March and April of 2021—there’s going to be some bad news in there. No doubt about it. And the government is going to have to figure out a strategy for handling this. Whether they excuse some of this, handle it on a case-by-case basis, offer an interest-free payment holiday, there’s going to have to be a way to carry these people who (through no fault of their own) are finding themselves with tax bills and unable to pay. Accommodations must be made.

Tom: Looking at the business side of this, especially small businesses is a similar problem. You can get the $40,000 loan and you keep$10,000 or pay back $10,000. I can’t remember what the rule is on those loans.

Rob: I don’t remember the details of that program.

Tom: My concern with that still is if your business is struggling and you’re getting bailed out a little bit, there’s still money to be paid. Just like the CERB it makes me a little concerned about next year. Maybe it gets pushed back a little further. I don’t want to be too negative, but it just seems like there’s still another shoe to drop on some of these issues.

Rob: There are many shoes to drop. When you think of people who maybe didn’t qualify for any of this, who made it through to this point and are waiting to see how the economic recovery takes shape in 2021 and their employer is sort of on the fence wondering how badly they’ll be hurt during all of this, there’s going to be more job losses. There’s going to be people who were furloughed but actually find out they were just laid off because they’re not going to bring back everybody who left. I think there’s going to be a restructuring. Companies are going to use this as an excuse for restructuring that will make them leaner and meaner. I think that will be part of the story in 2021. There’s going to be this tail on the pandemic even after the virus is gone. There are going to after effects in terms of everybody’s tax return, employment possibilities, their hours worked, their opportunities to move to better jobs, to get raises. It could all be affected for the worse unless there is some sort of quick end to this with a huge relief rebound. That’s a possibility, too. There are so many open questions.

Tom: Yes, it’s going to be interesting for sure. You mentioned people that thought they were furloughed and might lose their job in the end anyways. I’m just guessing here, but some of these people are going to be people that maybe don’t make the changes they could have been making this year because they still have this sense of security that it’s coming back to them eventually.

Rob: I think part of the issue is that the story of what happened financially in 2020 is dominated by two story lines that are very positive, the housing market and the stock market. Those are two barometers we commonly used to measure what’s happening in the economy. They’re taking up a lot of the bandwidth in terms of the discussion of what happened. There is a lot of hardship out there. We heard about it in March, April and May. And then these programs took effect. And now, we’re hearing a few stories about people who are in trouble trying to pay back what the government says they owe. But a lot of people don’t understand the pain underlying a lot of everything that’s going on right now. I wonder if in 2021 we start to put that story line on more of an equal footing after the trauma of this great stock market rally. And holy cow—housing prices are rising higher than ever. After that has sort of played itself out maybe we’ll get more exposure to the financial hardship stories.

Tom: I hope so because when you look at real estate or the stock market, those are really kind of “on paper” numbers. It’s not something that’s going to feed your family. Having that job is much more important.

Rob: Absolutely, absolutely. But it’s important to remember the unemployment rate has dropped quite considerably since its peak months. More people are going back to work. And I sense a lot will go back as soon as their employers feel that they’ve got a floor underneath us. But the problem is that we have a lock down, then we’re opening things back up again and then there’s another lock down. These poor business people are yo-yoing. They’re managing their expenses and their workforces. They’re in, they’re out. So much depends on how quickly we can get back to an open and fully functioning economy.

Tom: These lockdowns—and I don’t want to get too politically charged, but these lockdowns have been something where we’re just going to look back at it years from now and say, “This province did this right. This province did that wrong…” Because, again, I fully realize the lockdowns are needed. If anything, it was the fact they were taken off and then put it back on again. If you were a restaurant where you were locked down one time and threw out all your inventory, now you’re open and have to buy all the inventory again. Then suddenly you’re locked down again. It makes things worse going back and forth.

Rob: Well, it was this struggling of the health aspect and the economic aspect of it all. It was a constant recalibrating and it brings us to this problem. If we all just wore masks and isolated from the beginning and not started congregating, I think we wouldn’t have to do a lot of these lockdowns. So, we can blame the politicians but we can also blame the people who didn’t listen to what public health was telling them.

Tom: Yeah, it seems simple enough to wear your mask and sort of help fix things. You shouldn’t need the government to tell you that whether you think they should or shouldn’t. It just seems simple. Early on we saw all the information from 100 years ago that there would be a second wave. And sure enough, we seemed to just walk right into it.

Rob: Yeah, it’s human nature. We’re just not that good at taking the long view. In April and May when things started to get a little bit better, we were so relieved and happy to be out and about that governing ourselves appropriately for a second wave in the fall just wasn’t on. In personal finance they call it recency bias. You operate under what you’re seeing right now and tend not to be able to conduct your affairs according to what will be important months or years from now. The more we can do that, the better off we are in all kinds of aspects of our lives, our personal finance and with the pandemic.

Tom: That’s a great Segway, actually, because one of the things I wanted to talk about was this year, investment wise. It was this same wild rollercoaster of ups and downs. I remember when everything first started dropping, despite my advice to others to not try to time the market, I did find myself taking any spare money and investing on the way down. It was a scary thing to do. In the end, it worked out because thankfully it came back. But investing on the way down was not an easy thing to do. I just tried to put the emotions aside knowing this was a temporary thing. But what’s the thought of the market in general this year?

Rob: Well, we’ve never seen a better lesson about buying low– about putting money in when the market’s falling. I didn’t put any vast sums in, but every time I saw the market tanking, I put a little cash into various accounts. I did that over and over again. And this year just hammered home the lesson that the stock market comes back. It always does. This is way faster than anyone expected. And it’s way faster than it probably will ever happen again. It happened for reasons that aren’t all due to the wonderfulness of stocks and how much money all these companies are making. Government money poured into the economy to stabilize things and interest rates are pretty much zero, so what else are you going to do with your money? But nevertheless, it was a validation of buy low, buy on fear. All those old platitudes about investing were completely validated this year. I just don’t want people to come away from all of this thinking that, “Oh, the stock market’s down. Let me put a fortune into it. Let me borrow money and I’ll be I’ll be good again in three or four months.” This is an exceptional one. It may take longer next time to reap the rewards of buying low but I’m pretty confident that it will always yield rewards if you can keep a long-term perspective.

Tom: I personally find that buying low is the easy thing. Predicting the top is next to impossible. The way this jumped up so quickly this year and recovered, I thought for sure it was going to go back down. It just seemed like something that just didn’t make sense.

Rob: For a lot of people, it seemed like the stock market was completely disconnected from reality. And in some ways it almost seems like that now because we have vaccines. They’re trickling in. But we also have a lot of Covid around right now and we’re locking down in countries around the world and we don’t know how much damage that’s going to do to the economy. We’re heading into a new year and there’s a lot of expectations of things getting better but we have a little ways to go yet. The stock market just keeps pushing prices higher. We haven’t really even had a sharp down day in quite a while. I don’t know. I’m seeing a lot of optimism about stocks in 2021 and I hope we get the economy to justify that optimism.

Tom: That’s exactly what I was thinking—this idea that businesses may not have fully realized their troubles based on all of this especially if you’re a restaurant that’s already so hard to run. And these airlines or cruise lines could go bankrupt at any point. It just depends. Maybe we find everybody’s got the vaccine but nobody really feels like traveling for a few more years.

Rob: The one thing I think the economy has going for it is all this cash that’s piled up in savings. Going back to the people who are okay in this who were working at home. Their expenses have gone down. They’re stockpiling cash. There are estimates that we have somewhere between $90 and $200 billion sitting in bank accounts that would not be there if not for the pandemic. A lot of economists are saying, even if some of that money were to find its way into the economy, that is going to be a huge leg up next year. It could into travel, events, restaurant spending or even into furniture and renovations—all kinds of different stuff. It could go into investing. Man, if I were in retail or the investing industry, I’d be plotting right now how to get our share of those billions. That is money that can easily find itself going into the economy as a sense of relief washes over the country. I very much hope that sense of relief comes sooner rather than later. But that’s still kind of like a turbo boost for the economy. Everybody’s trying to figure out how much of it’s going to come into play. Are people going to hoard that money? Are they going to be worried about future pandemics and future job losses? I counsel people to spend some of it if you can. Make sure your redundancy funds topped up. Take care of other obligations but do your patriotic duty and put some of this money into the economy. It will help companies meet their payroll and help people stay employed.

Tom: I’m glad you brought up savings because that’s something I wasn’t thinking of. That is definitely a silver lining. You’ve already mentioned some companies that would benefit from some of the savings. I’ve seen ads on the Internet from cruise companies saying how they’re doing all these new things, throwing in so much extra perks if you just book a cruise. So they are taking steps to say, “Okay, we’re planning for next year. This is how you can use your money.”

Rob: Yeah, I think the first wave of people will go back to doing some of these sort of luxury activities. They’re probably going to get great deals on a great experience. But I would not be surprised if there is a snap back in that luxury category and all of a sudden the cruises, airline tickets, fancy restaurants will see prices back up—You’re going to see a little sort of luxury inflation. The broader economy does not reflect this but I think people are hungry to do interesting things again. They’re tired of being in their houses all the time. As soon as they feel a sense of comfort, there’ll be a lot of people going back to concerts, restaurant, and they’re going to travel.

Tom: One of the funnier stories I saw a couple of months ago was about an airline in Australia that was booking a flight where people just get on the plane and do this big trip around Australia then land right back where they were. It was just to fill this need of some people to get on a flight and go somewhere.

Rob: Well, that’s probably an extreme way to get your jollies. But whatever floats your boat, as they say.

Tom: Oh, yeah, it’s definitely extreme. But I’ve got to admit, I miss airports in a way I didn’t think I ever would.

Rob: For sure, eh? It’s true though. All the annoyances of travel now seem like so exotic.

Tom: If we can go back to the negative side again, there is a portion of Canadians with increased savings. Do you have any numbers? Do you know if there’s a portion with increased debt? What’s that looking like?

Rob: The debt to income ratio went down a little bit. It’s ticking higher. A lot of people have taken this idea that they’re not spending and have moved their money into debt repayments. Right now, between the CERB money, other government programs and the opportunities to spend are greatly reduced. The indebtedness profile in Canada isn’t the worst story but as we get to a normal economy with government support programs being reduced or eliminated and companies in a cautious mode about how many people they are going to bring back and how much spending they’re going to do, I wonder if the debt problem is going to be a 2021 story. With debt, that means insolvency. It means delinquencies and it means mortgages in arrears and credit cards that go unpaid. We’ve sort of papered over that problem in 2020 so maybe in 2021 we start to see those numbers tick higher and start to tell their story about what really happened in those households where jobs and incomes were lost.

Tom: We’ve touched on a few things moving into the New Year. But just to get another one of these predictions from you that I can look up a year from now, can you just summarize what you see for next year with your crystal ball?

Rob: I see a year of real contrasts much like 2020 where there’s going to be parts of the economy that are just bursting out. There is going to be a segment of the population that is really struggling. I don’t know how much this is going to dominate the headlines, but I think there’s going to be a real push for governments to spend money to support these people. To continue support programs and come up with ideas like a basic income for everyone, recognizing that the pandemic left a lot of people disadvantaged and that this struggle will continue into 2021. Do we do something about this or do we just leave them to their own devices?

Tom: It’s definitely going to be interesting. I like hearing from you that there’s increased savings, debt reduction and that people are making the right decisions. The idea that they’re looking at doubling their emergency fund is great too. It reminds me back in 2008, 2009 when I decided to get my money act together. It was for very similar reasons. It was this big wakeup call that you have to do something. You have to take the right steps and not just go year-to-year feeling like everything’s going to be fine.

Rob: I think when we talk about things to do to protect yourself (in personal finance) we were always envisioning a year like 2020 but we could never articulate it because it would seem so absurd. What if a pandemic hit there was massive unemployment? What would you do? That’s why you have an emergency fund. But now I feel the whole idea of the emergency fund has been sold for us. What we have to do is ride the momentum and encourage people to always be thinking if something happened and my job was affected, how would I get by? What resources would you have? I think that is a great thing to be thinking about if you’re fortunate enough to be employed and to have a solid income. If you’re not, you need to get through this period. This is all stuff to worry about once you’re back on your feet.

Tom: Yeah, even I’m rethinking the whole emergency fund. I’ve always liked the idea of a three month emergency fund. With a traditional job loss you can likely find another job within three months. You’d be back up and running. But it’s definitely worth reconsidering. This has been an example of why you might need a 12 month emergency fund. Because things happen.

Rob: There’s going to be people who push back against this saying, “I’m going to put my emergency fund into savings and get no return on my money,” and that is definitely a counter argument. I don’t accept it. The whole idea of an emergency fund is to have the money there—the interest is a bonus. The first goal is to have money parked safely and not earn a return. We have to understand that’s the goal for emergency funds. But when we talk about a year’s worth (of emergency fund), I think it just discourages people who are having trouble getting one month. I continue to say, “How much can you put aside and would that make a difference if you lost your job?” If you told me you only had $1,000, I would say having $1,000 safely ready is certainly better than zero. So go with that and then try and build it up. And if you’ve got one month, make it a goal to try to get to two or three months over a 12 month period. Build in a modular way where you’re adding to your fund as you can. Then you get to a certain point where you say, “I think six months for me (in my profession) is enough so I’m going to start taking that money and putting it into long term investments.” I think we all need to sort of think about our comfort level for peace of mind (come what may) where we can still carry on our lifestyle in a stripped down way for a good half a year, a quarter of you, whatever makes you feel better. But we all need to find our comfort level.

Tom: This has been great. Thanks for running through the past year. You did a much better job finding the silver linings in it than I had coming into this so thank you for that. Can you let people know where they can find you online?

Rob: I’m on the Globe and Mail. You just Google my name and endless personal finance content will appear before your eyes. I’m on Twitter. Wherever personal finance is found, I’ll be there.

Tom: Great. Thanks for being on the show.

Rob: Thanks, Tom.

Thanks, Rob, for your insight into the year that was 2020. I appreciate your ability to see the silver linings and for sharing your predictions for 2021. You can find the show notes for this episode at maplemoney.com/132. Are you new to the Maple Money Show? If so, I want to thank you for listening. In case you weren’t aware, you can watch videos of many of our top episodes over on our YouTube channel. If you’re interested, head over to maplemoney.com/youtube. Make sure to like the video and hit the subscribe button. I look forward to seeing you back here next week when Doug Nordman and his daughter Carol Pittner join the show to discuss growing up in a financially independent family.