We hope you enjoyed “Are we in for the Roaring 20’s 2.0”  

Now here is Part 2!

As we look to the post-COVID-19 future that is hopefully just ahead, the stage is set for a period of rampant consumer spending that could look a lot like the 1920s. A decade that ended very badly with the Great Depression.

But is it inevitable that we will experience a great period of economic rebound followed by a crash? No.

Can individuals take action to cushion the blow of any future post-boom contraction? Yes.

Listed below are a half-dozen ideas/products that we think would help individuals. We can assist with all of these and in a series of shorter posts we will provide further details. Stay tuned and please reach out to us if you have any questions.

1. Be aware of how powerful FOMO, YOLO and the desire to “Keep up with the Joneses” can really be. Just because everyone you know is looking to borrow $2M to buy a lakefront Muskoka cottage doesn’t mean you should too.
2. Create a financial plan: a roadmap for your future that identifies actions to take right now, guides future decisions and ensures you are protected in case of economic shocks. With interest rates at historic lows it’s tempting to borrow. But if dramatic economic expansion occurs, interest rates will rise. You need to be especially conscious of your personal debt level and ensure your financial plan emphasizes debt paydown.
3. Open a TFSA: much better than keeping your savings in a bank account.
4. Open a corporate investment account: if you move excess corporate cash from a chequing account into an investment account, you can expect to generate 10 times the rate of return.
5. Government debt is at an unprecedented level. Tax rates will rise in the near future, especially on higher income earners.
   1. Plan for higher taxes by increasing savings.
   2. Revisit pure dividend strategies that limit RRSP contribution room.
   3. Consider incorporation if you haven’t already.
6. The pandemic shows us that unexpected and devastating illnesses can happen at any time, no matter how healthy or careful we are. A major decline in health will often come with major financial consequences, and even a minor change in health can limit or prohibit future insurability. Review your insurance portfolio:Make sure you have adequate disability
   insurance to protect your future earnings against illness or injury.

• The risk of contracting a Critical Illness like cancer, heart attack, or stroke is increasing. The probability of survival is also increasing, meaning living with the financial consequences is a real concern. If you don’t have Critical Illness insurance you should get it while you are healthy.
• For incorporated business owners, the opportunity for your business to pay for Critical Illness insurance offers meaningful long-term tax benefits even if you never get sick.
• Make sure you have adequate term life insurance to fully replace your income and give you future options in case of a change in health.
• We will all pass away at some point. If all you own is term life insurance, your coverage will almost certainly expire before you do. There are expenses in the final years of life and costs/taxes triggered by death, that are better handled by tax-exempt permanent life insurance than by any other asset type. Consider adding a Whole Life plan while you are working so that it’s fully paid up when you retire and will be there when your family needs it.
• Consider life and critical illness insurance policies on children to protect their future insurability.

These suggestions are all practical, doable and affordable. Most importantly they can be started now. If we are in fact headed for a Roaring Twenties 2.0 followed by a contraction or crash, the individuals that begin to take concrete actions now – increasing savings, decreasing debt, securing protection – will be much better off than those who allow their short-term desires to cloud their better long-term judgement.

As mentioned, stay tuned for more details in the coming days, or get in touch any time to discuss.