How to Improve Your Financial Fitness, with Tracey Bissett
Welcome to The MapleMoney Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. I’m your host, Tom Drake, the founder of MapleMoney, where I’ve been writing about all things related to personal finance since 2009.
Have your finances been negatively impacted during the current COVID-19 crisis? Perhaps you’re still working, but wondering what you should be doing to solidify your financial situation. My guest this week is here to help.
Tracey Bissett is a former banker turned entrepreneur. She educates young adults and small business owners through her weekly podcast, Young Money, as well as the teaching and delivery of financial courses, coaching and consulting.
Tracey sits down with me to discuss ways that Canadians can cope through the current financial crisis, and shares some practical steps they can take to get themselves on more solid financial ground in the future.
According to Tracey, the first thing to consider is your cash flow. Do you have more money going out than coming in each month? If so, look for ways to reduce your expenses. Many financial institutions are offering deferrals on mortgage and loan payments right now. While it’s not in your best interest to defer payments if you don’t need to, Tracey recommends this as an option for anyone who’s income has been suddenly cut. Not only will it help to boost your cash flow, but it will also secure your credit rating over the long term.
Tracey and I also discuss the importance of having an emergency fund. Even if your job has not been impacted thus far, without an emergency fund in place, you may not be able to absorb a sudden drop in income should it occur in the future. Begin setting money aside every time you get paid. When your emergency fund goal is achieved, you can shift your focus to other financial priorities.
Our sponsor, Wealthsimple, believes that financial independence should be available to anyone. That’s why they have no account minimums, meaning that you can get started investing for as little as one dollar. Don’t delay any longer, invest online by visiting Wealthsimple today.
- The simple math of personal finance
- Ways to manage through the current financial crisis
- The problem with cash flow often has to do with timing
- Banks and car companies are looking for ways to help their customers
- Kijiji is a popular way to raise money right now
- If you’re still working right now, maintain the financial discipline
- If you can set aside an emergency fund during COVID-19, do it
- Talk to people if you need help with your finances
Have your finances been negatively impacted by the current Covid-19 crisis? Perhaps you’re still working but wondering what you should be doing to solidify your financial situation. My guest this week is here to help. Tracey Bissett is a former banker turned entrepreneur. She educates young adults and small business owners through her weekly podcast, Young Money, as well as the teaching and delivery of financial courses, coaching and consulting. Tracey sits down with me to discuss some of the ways Canadians can cope through the current financial crisis as well as some steps we can take to get ourselves on more solid financial ground in the future.
Welcome to the Maple Money Show, the podcast that helps Canadians improve their personal finances to create lasting financial freedom. Our sponsor, Wealthsimple, believes financial independence should be available to anyone. That’s why they have no account minimums, which means you can get started investing for as little as one dollar. Don’t delay any longer. Invest online by visiting maplemoney.com/wealthsimple. Now, let’s chat with Tracey…
Tom: Hi Tracey, welcome to the Maple Money Show.
Tracey: Thanks so much, Tom. I’m really excited to be here with you today.
Tom: I looked back at one of your past episodes of Young Money, episode 117 at the end of 2019. A couple stats you put out said more than half of Canadians are just $200 away from being unable to pay their bills. And another one was one in five couldn’t afford to live for a week if their primary source of income disappeared. Back at the end of 2019, you didn’t know how 2020 was going to end up, unfortunately. How much more has this been magnified? What’s your sense of what’s going on out there?
Tracey: I think right now we still have this false sense that things are okay because of all the government supports that have been coming through. People are being propped up a little bit so I don’t think the problem’s actually been exacerbated yet. We know there are still Canadians who are falling through the cracks where the programs don’t exactly line up with everyone who needs funds but the vast majority of Canadians, whether they’re individuals or business owners, are getting some relief from the programs. I’ve been hearing some people are more stressed than others. Some people may have had job loss but are picking up the $2,000 a month for unemployment or the special CERB program so they’re not feeling the big shock yet. Fast forward into September or October of this year—that’s when we’re going to start seeing the problem get a lot worse. The supports may be curtailed. I won’t say they will because if everybody’s in a real jam, they’re certainly going to have to continue them. I expect there’s going to be a lot more real estate on the market. People are going to be moving out of their homes because they were so highly indebted. If they can’t keep the payments up once the support is gone, that’s going to cause some other challenges. It’s interesting you raised those stats because I was interviewed by a reporter in March or April… It must have been in April because they were looking at March numbers from a study. They asked me to comment on some of the stats. Their numbers were based on people’s opinions. The pandemic had already started and they were showing the numbers not as scary or as bad as you read out when you asked me the question. I was didn’t think those numbers were right because there’s no way things got so much better in just a couple of months time. I think people may be feeling optimistic or they’re not really giving true opinions. Or maybe we didn’t sample enough people in this survey. But to me, it seemed a little bit light that things would be more positive than what I had been talking about the end of last year.
Tom: You mentioned real estate, these mortgage deferrals. When those deferrals stop, there’s going to be a problem if someone still doesn’t have their job. It doesn’t help them in the long run. And certainly the government can come in, especially on the different programs they have for people who have lost their jobs. But I think the mortgage deferral was mostly on the bank so that’s something that they could take away at anytime. It may not be great press but it’s an issue if these banks aren’t collecting their mortgages. It could spiral further, I would assume.
Tracey: We already saw the earnings releases from the banks and everybody’s earnings are down. Not that they’re losing money, but they’re earning a lot less money than they normally earn. So they’re not going to force the Canadian population into bankruptcy as a whole. But there will probably be more judicious decision making later in the year as it comes to deferrals and reasonably, what the plan should be at that point. I was a banker for many, many years at TD in the areas of commercial lending and risk management so I’ve certainly seen a lot of personal adjudication over the years. It’ll be interesting to see where things go. I know they’re employing different strategies whether it’s deferrals on mortgages and cutting rates on credit cards so it will be very interesting to see. If people who are listening right now are feeling maybe a little bit overconfident, they should be checking that feeling and making sure they’ve got their financial house in order. One interesting thing that’s been coming up for me that I’ve found while talking to a lot of individuals and business owners is this feeling of not wanting to apply for those deferrals or those government supports because there’s so many people out there in a worse off situation than they are. I find that really interesting. I think it’s got to be a Canadian thing because I’ve repeatedly had people tell me didn’t make their applications either to their financial institution or to the government because they honestly thought they should be a little bit selfless and leave it for other people. If you qualify and meet the criteria you should take those funds unless you can completely meet your payments on the deferral side. Get the $2,000 a month and if you qualify for something else, take the money. Don’t spend it. Start building up that emergency fund you knew you should have had before this all started. Just be ready because we don’t know where we’re going. We’re all in this pandemic together but everybody’s financial situation is different and we don’t know what the future months will show us.
Tom: Yeah, I think people should always take what is entitled to them. It’s no different than why would you skip a tax refund that you’re owed? If they’re going to make a program and you qualify for it, ultimately, it is your tax money so you might as well get it back when you can.
Tracey: That’s what I’ve been saying too, we’re going to pay for this later so take your share as well if you qualify. But if you’re trying to game the system, don’t do that either.
Tom: It’s definitely been interesting. We’ve talked about how the banks can help out. With banks, it’s just them being helpful but it’s also a good business decision. You were at TD before so you know you don’t want people defaulting on their payments. You don’t want it going into collections and all this stuff where you’re selling it for pennies on the dollar. So obviously, if they can defer it, it does help them keep that client stable so it does pay off for them in the long run, I assume?
Tracey: Yeah. And just from a technical standpoint, with the author of these deferrals, nobody’s missed payments so they’re not actually going to be classified as bad loans yet. Internally, they’re doing provisions around what percentage of the pool of this money might be at risk now and having conversations. But I think there has been a lot more proactive conversations out to clients (if you actually get to talk to somebody) where they’re checking in on their clients’ situations to see if they need deferrals. There has been a lot of outbound reaching to clients who didn’t make applications for deferrals, where people are assessing them in the bank and saying, “Maybe you should give it consideration,” so I find it hard to imagine everyone doesn’t know it’s out there. But I also follow all the news and I’m definitely listening for those things when I hear them. So there are people who don’t know yet that there are things that can help and you don’t need to be eroding your emergency fund if there are other funds out there for you to have access to.
Tom: Despite what the government’s doing, the banks are doing, I do want to bring this back to what we can do personally. Obviously, there’s great advice that isn’t useful now, like having an emergency fund. It doesn’t help you at this point in time. But one thing you do a lot of work with, which I’m a big fan of too, is cash flow. There’s so much good that goes on in personal finance but it’s the simplest math of just spending less than you make. It’s like dieting; just burn more than you’re taking in. Can you kind of walk us through how you work with clients? How does this look when you’re sitting down with someone? Maybe they are in a bit of a rough spot, whether they’ve lost their job or they’re just working less, how do you sit down with them and start looking at this cash flow? How do you look at their expenses and income and make this all work?
Tracey: The first thing I encourage them to do is take a deep breath and just be prepared. We have to know the facts. I find a lot of clients out there worry a lot about the numbers they don’t know. Until you actually have the facts there’s nothing to exactly worry about. You may not know whether it’s good or bad, but oftentimes the numbers come in better than you’re thinking in your head. You’re usually imagining the absolute worst case scenario; your life is going to be over and your family won’t have what they need. So let’s get the facts and focus on reality. Cash flow, for me, is really straightforward; money comes in, money comes out. The timing is where the problem usually happens. I talked about this in one of my Young Money episodes where we looked at cash flow before March. How much money was coming in? How much was going out and where exactly was it going? Was there a shortfall? For most Canadians, because of the stats you mentioned, the number was probably negative—at the bottom, “I had this much coming in…This much went out and I had a deficit.” Maybe they were using a credit card or line of credit to supplement. So, we get the first set of numbers. Let’s look at what can we do now that we’re in this situation—one we couldn’t ever have anticipated. Do you still have your job? Do you have some money coming in? If you don’t, have you been able to apply for support? Let’s change up that inflow. Now, you’re home most of the time. Can you get a break on your car insurance which I know some people been able to do. Some insurance companies are doing it proactively. Others, you have to call. I know I had to contact them for mine, but I did get $100 back in March and $100 is $100. What can you stop paying or where can you make some changes? For example, if you had a gym membership, you’re going to pause it. You’re going to not make those payments but you’re certainly going to look at all of those expenses to see where you have some latitude so that when you get to that number on the bottom, whether it’s positive or negative, that’s when you can actually make some concrete plans about what you need to do. There’s a gentleman I know who recently lost his job before the pandemic. He was set to get a new job, but the offer got rescinded when the pandemic came. He had just leased a really nice car. And he’s been making lemonade out of lemons. He’s been renting out his car and actually netting positive every month because car rental companies haven’t been open. So you may need to be a little bit open-minded about where you can get your funds from or where you can actually cut. Don’t make it too complicated. Get a piece of paper and write it out. If you like Excel, do it in Excel. There’s no need to make it super complicated but do the work to dig up the numbers and see where you actually stand. And then if you do need help to sort through the numbers and figure it out, go with a financial planner, adviser or a coach. There’s never been a better time for you to be able to talk to them and figure out where they think the market’s going and to help you with your numbers. They’re all looking for clients and they’re all doing marketing so if you have one that hasn’t been helpful to you, interview a few others. Find somebody you like. You can always find somebody who will connect with you. You may have to go through a few interviews with financial advisers to find one you can talk to that will help in a way that works for you.
Tom: You mentioned someone you know that is renting cars. I’m a huge fan of Turo. I don’t know if that’s what they’re using but just the fact that it’s like an Uber app where you can rent a car out and it is super simple. It made me think of how people can kind of create their own raise. In this case they might just be sort of struggling to get any income but there are so many different apps and side hustles out there. We’ve covered them on the show before. It’s encouraging to hear they were able to do that because I was worried about things like Uber. I’ve seen people using it less right now. So if that’s your side hustle or primary job, you’re probably even hurting there too.
Tracey: For sure. And certainly anybody who is making a living renting out properties on airbnb or a vacation rental by owner, we know that’s been hit hard. But, what can you do in your same space? I was talking to a business owner who had just bought this huge property and they weren’t sure what they were going to do. They actually hadn’t got to that opening day. It was going to be March 15th or 16th. And so I said, “Why don’t you tap into your community and find out who is still booming,” We know essential services need more space because they need to space people out and do things in a different way. Maybe the way your space is laid out can be of use to something that’s booming right now. You could lease it out to them. It’s all about not being in despair. I know it’s really hard when you’re worried about being able to be your family and keep a roof over your head. But if you can think a little bit outside of the path you were on and try to be creative by talking to other people who might have different ideas than yours, there’s probably something you can think of that will work. Not that it’s going to be super easy, but a few inquiries and you might be able to solve your situation or make it not as bad as it was.
Tom: And it’s important too that you’re not just going into your shell when bad things happen. And unfortunately, again, more advice that would have been helpful months ago, but it’s easier to plan ahead than it is to deal with it in the moment. But here we are in the moment. I love that idea that you just look at where you are now, deal with it, react and not shut down by letting the bills pile up. Like the mortgage deferral. All you have to do is contact the bank. I think you can do it through the website too, to make that deferral official. It’s not that you just stop paying—that’s not the step.
Tracey: The same goes with anybody who’s got cars on financing from dealerships. They’re making it super easy there. Everyone wants to work with their clients so take advantage but not advantage in a negative way. It’s not that there’s something wrong with you where you should feel ashamed. You shouldn’t feel like you’re the only one. They’re making these things available to clients because they know across the board Canadians are having a hard time and they want to make it as easy as possible for Canadians to solve a part of their issue.
Tom: I think that’s a good point. If you are having trouble with your mortgage payments, car payments, don’t just ignore it. Reach out to these companies because it sounds like most of them will probably work with you. And again, they’re helping themselves out to it’s not charity. They’re helping to keep you as a client in good standing. It’ll all work out in the end.
Tracey: The other thing I would say on that is, if they give you instructions on their website about how to do it, you should do it that way because you’re going to get things approved a lot faster. Things are going to get processed a lot faster because they’re inundated with calls and inquiries. To have the most success and make it less frustrating for you, follow their instructions to a T and it should be smooth sailing.
Tom: Now, on this expense side you mentioned canceling the gym membership and all that, too. What else can we do to sort of offset this? Something I’ve mentioned before on the show, I had sold a bunch of old video games. I think it was over $2,000 worth. I don’t want to think what the value was originally. I wasn’t making money. I was still losing money. But in that moment, it was $2,000 of new money. Should people do things that? See they have? It’s not about liquidating everything. I hope I’m not the only one that just sort of hoards onto everything. Do people have these kinds of opportunities?
Tracey: Yeah, absolutely. I would think of them as assets because if you’ve got something like video games, it’s physical, it’s tangible. You can sell it on Kijiji. Everyone that I know has been buying things on Kijiji. There is quite a market, especially because people can’t get into stores. So, if you’ve got a kid’s bike they used three years ago and now it’s too small for them or you just haven’t got around to donating or selling it put it on something like Kijiji or Craigslist. There’s probably somebody out there looking for some way to keep their kids busy right now. The other thing I would say is if you have skills, there’s never been a better time to do things online because the demand for people who can tutor, do online babysitting, do music lessons— that’s just skyrocketing. Maybe a musician can’t be out in clubs anymore doing what they love and making money the way they used to, but there’s no reason they can’t take their same skill-set and have a day filled with music lessons as all of these parents scramble to keep their kids busy all day long. So don’t diminish what you have and try to be open-minded about what you can do.
Tom: One thing I heard you say there was about online babysitting?
Tom: What is that?
Tracey: It could be playing games. I come online for an hour and now I’m playing a game with your child. You can go off and do your work. It’s obviously on the computer. It’s someone else for them to talk to. Everyone’s kind of tired of each other living in the same house so let’s have some new conversations, new ideas and new activities, especially if the person is skilled in education. They can maybe play some educational games. I’m not a parent myself but from the parents I’ve talked to, they’re just happy their child is busy for one hour without them. So talk to your friends. Look online. People are doing music lessons, tutoring, babysitting… There are all kinds of things out there. And those people, in turn, are able to make money not that what they did primarily is not available to them.
Tom: That’s another great example of people just dealing with the moment and finding something new. When you first said that (about online babysitting) I thought you just can’t leave your kids with someone online. But I have talked to a lot of people in this situation where they’re working from home, which is great, but the kids are also home. They’re not getting that eight hours of quality work in. They’ve got kids hanging around their neck while they’re trying to type.
Tracey: And, obviously, it has to be through reputable sources. Hopefully, that goes without saying. But get referrals from your friends and people you know because we have to be mindful of online predators and things like that. We don’t want that to be the case. But if you get recommendations and people can validate and vouch for these people, it’s important. One of my friends has been telling me that her child is the happiest. He has three different “one hours” sessions a week where he gets to talk to so-and-so because she makes him do work in a fun way. He doesn’t give her grief like he gives his parents. He’s doing it, he’s learning and he sounds happy. She can overhear what’s happening because they’re usually close by. It’s not like they’re not in some other different part of your house and don’t know what’s going on. It’s just changing up the experience. It gives parents a little bit of break and that tutor or music person is earning income too. So think about what skills you have that you can bring online. Not that this is going to be your destiny, but could you make a couple hundred bucks a week that could help? Be open to it even if it scares you a little.
Tom: I think this is going to change things for people a lot. Let’s say you have a corporate job. Working for home is going to become a lot more common. I also think people aren’t going to have that 40-year career. They may not have a proper full time job. So these side hustle kinds of things are probably going to become more and more common. It’s become more common for years because of technology but I think this year is going to make sitting at home with your normal job more common. But also, the idea of $100, $200, or even $500 here or there can do so much more for you than waiting for that one or two percent raise at your regular job. I see that changing where this might become a lot more common.
Tracey: Yeah, absolutely. It certainly increases your resilience, your creativity, your ability to be agile. And those are all things people you work for are looking for. So you can really easily distinguish yourself. I’ve been learning new technologies every week for the past couple of months. You have to be open to learning and finding opportunities. It allows you to help yourself and you don’t have to wait for people to be potentially giving you handouts (if you view the government’s support as a handout) or being chained to a job that you don’t really love but also don’t want to lose that paycheck. So be open. The more you do it, and the more success you have, you’re going to have a lot more confidence and not feel afraid to do it.
Tom: I was joking earlier that starting an emergency fund isn’t helpful to a lot of people right now, but for some people, if their situation is still pretty normal right now, I would hope this would be a bit of a wakeup call where they could probably look at things like starting an emergency fund, paying down debt. What are your thoughts on some of those things where they can improve their cash flow and planning when they are in a more of a stable position?
Tracey: If someone is still employed where they’ve got a regular income—you might even be earning more because you’re getting overtime… First off, if you don’t have your emergency fund, start there because we don’t know what will happen. I think this has basically proven that we don’t know at any time in life, what will happen. And so we always do need to be prepared. The guideline target was three to six months worth of emergency funds. Maybe you’re saving up a little bit more than that now. So that will help you feel more comfortable, more stable. Then let’s go tackle some debts. Anyone I know that’s working, I am not recommending they take deferrals because you’re just going to pay more interest on your mortgage or whatever it may be. Keep making those payments. If you own a home and can afford to pay your property taxes to the city, pay them. Keep up with your regular routine and the discipline because if you start getting a little bit lax around your financial practices, you quickly can move into a place where you don’t want to be where all of a sudden you think you have extra cash flow and you’re spending it a little bit mindlessly on Amazon or something else online. Keep the financial discipline. If you didn’t have it, start bringing it into place now because you do have fewer things that are not online vying for your attention to spend money on. It’s a really good time to put some new routines and practices into your life that can help you have that discipline day-in and day-out.
Tom: And even if you haven’t been affected at all, I think this current situation is a poster child for having an emergency fund. I’ve spent years listening to people say you don’t really need three to six months for an emergency fund. They believe if they lose their job they can get another one within a month. Times like this show you may not. There’s a reason those kinds of long-range things happen. Sure, there’s the individual situation where someone does lose a job for months before they find another one. That happens, 100 percent. But this is just been a much more public way where people can see they actually do need a few months of income stored away because these things happen. Not like this and not all the time, but it’s just a really “out there” idea.
Tracey: Two years ago, I had a run of events that were all expensive. My roof was leaking. I needed a new roof. My car was acting up and there was an accident so I had to deal with that. Then my dog was ill and I had a lot of vet bills. All of that was not in my normal budget. Luckily enough, because of my routine about saving, I had my emergency fund. But stuff happens. People can contract illnesses that are not Covid-19 and all of a sudden they can’t work as much as they used to. You just want to be prepared so that you can sleep well at night and know no matter what happens tomorrow when you wake up, you’re all set.
Tom: You just reminded me of something. I knew this person who, unfortunately, found out they had cancer. They got in a car accident and lost their job. To go from one position to another so quickly in whatever span of time it was—I don’t recall exactly, is just another example of why you’ve got to prepare for this. It seems like you’re preparing for nothing sometimes when you start an emergency fund. But at some point, something’s going to happen. It could just be that your car has a big repair or your roof needs repair. Those are more general things but it’s still pretty much a guarantee that’s something’s going to need repair. A big repair is going to come up one way or another.
Tracey: The other thing to keep in mind too is that if nothing happens to you, you can stop contributing (to the emergency fund) and start using the money for other purposes. If you’ve got your emergency fund built you can focus on debt or maybe go on another vacation that year. It’s not like you’re continuing in perpetuity. Once you get up to a number you think it’s reasonable to encompass the potential things that could happen to you, then you’re using those funds for other things. It’s not a life sentence unless you do have some things happening. Unfortunately though, most people do have surprises that come up from time-to-time.
Tom: And to be clear, you definitely mean future funds and not your emergency fund for a vacation, right?
Tracey: Right, yes. If your goal was to save up $30,000 because that’s how much you felt would make you feel comfortable for your expenses for your household, once you hit the $30,000 you don’t contribute more to it until such time that you need to dip into it. Then you bring it back up to $30,000 again. So, yeah, you’re not using the funds for a nice vacation or brand new car.
Tom: Yes, future money should be available for that. That’s the new savings goal. You’ve got your $30,000 for an emergency fund so now you can save $5,000 for your trip with the same money you were making with the monthly savings payment.
Tracey: For sure.
Tom: Is there anything else we didn’t cover that’s important around this whole cash flow idea people need to know?
Tracey: I think it’s important to know your numbers. When you don’t know your numbers, you’re really just giving up control and that leads to sleeplessness. You get anxiety. It’s going to affect your health. It’s going to affect all of your relationships with anybody who’s interacting with you. And you’re going to feel a really heavy burden. And especially during this time, people are suffering with mental health issues because it’s hard being at home, hard not to keep up with your regular routines. You don’t want money to contribute to that as well whether you’re at home or not. So know your numbers. Talk to people if you need help. Know what the facts are and then take steps every day to move forward and change the situation if you’re not happy with it. But don’t be shy about talking to people. Don’t be afraid to ask for help. You’re never alone. There are always people out there who can help. There are lots of great resources around so it’s not a great idea to curl up into a ball and just stay isolated at home. You’re not alone. Keep that in mind and ask for help when you need it.
Tom: This has been some great advice for people, no matter what situation they’re in right now. Can you let people know where they can find you online?
Tracey: Absolutely. You can head over to my website which I imagine will be in the show notes. It’s bissetfinancialfitness.com. If you liked some of the advice given here today, you can check out the Young Money podcast, the advice show for young millionaires in the making. There is a weekly show you can enjoy. And anybody who wants to connect with me on social media, I’ll be happy to answer any questions or comments. I’m very responsive across the platforms. Thank you so much, Tom, for having me today.
Thank you, Tracey, for the timely advice on how to manage cash flow and increase our income during the current financial crisis. You can find the show notes for this episode at maplemoney.com/103. Are you a member of the Maple Money Show Facebook community? If not, I’d love to connect with you there. It’s a great place to ask a question or share a recent money win to encourage others. To join, head over to maplemoney.com/community to share with the group. I look forward to seeing you back here next week when Joel Parker joins us show discuss the importance of not burning bridges when you leave your employer. See you then.