March 30, 2023


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Try this before making a life-altering financial move in the pandemic

For this week’s guest Q&A, we have a veteran financial planner’s take on how people are handling the pandemic. Tina Tehranchian, a certified financial planner (CFP) with Assante Wealth Management, has some thoughts on the life-changing financial people decisions people are making these days in reaction to COVID-19, the continued relevance of emergency funds and the importance of seniors keeping a chunk of cash handy to cover their expenses when stocks crash.

Q: What’s your level of concern about people making life-changing financial decisions in the pandemic – retire early, sell the house in the city and move to the country – based on what will likely turn out to be a temporary event?

A: I always suggest to my clients that they try new ideas before making a long-term commitment to any type of lifestyle change. For example, if they want to move to the country, rent a place in the country for two to three months to see if they enjoy that type of lifestyle before selling their homes and making a long-term commitment. This will involve some extra expenses, but will be a lot less costly than making a major mistake in your timing and big changes in your life when you’re not emotionally ready for them. The same goes for early retirement, and that’s why so many people fail at retirement and return to the workforce again.

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Q: What kind of changes are you making in client financial plans as a result of the pandemic’s impact on their situation?

A: A good financial plan should not only include emergency funds for short-term needs but also be built based on the long-term goals of each client, and conservative assumptions about rate of return and inflation. We do Monte Carlo analysis for our financial plans and run up to 1,000 statistically randomized simulations based on various rates of return and life expectancy to ensure that each client has a high probability of achieving their goals. Therefore, other than tracking the financial plan on an ongoing basis to ensure that each client is on track to achieve their goals, there is no need to make changes to financial plans due to economic events. But if someone loses their job or receives a severance package during a recession, of course their entire financial planning needs to be reassessed.

Q: A lot of people are financially fine in the pandemic – maybe better off – and they’re spending bigtime, in some cases on things like home renovations. What’s your message to them about the need to maintain an emergency fund?

A: The pandemic was a big wakeup call for Canadians, and really highlighted the need for an adequate cash cushion for emergencies. While in good economic times, we feel secure about our jobs and our incomes, the pandemic showed us how in some industries, income streams can suddenly dry up. Having a minimum of three to six months of cash savings helps you deal with unforeseen emergencies. A home equity line of credit can also act as a low-interest option for those who don’t have cash savings. However, applying for a line of credit when your income has dried up isn’t an option. You should always apply for a line of credit when you don’t need it, and treat it like a rainy-day fund.

Q: I’m surprised at how many seniors don’t keep a cash cushion in their retirement savings to draw from in case the stock market crashes like it did in March. What’s your view on the importance of the cash reserve in a retirement portfolio?

A: It’s very important for anyone who needs to withdraw cash from their portfolio on a regular basis to fund their lifestyle expenses to keep a cash cushion in their portfolio. To be on the safe side, you should keep two to three years’ worth of lifestyle expenses in cash or a very low-risk investment in your portfolio. This will ensure you can sleep soundly even during periods of major market upheaval, and that you won’t do permanent damage to your portfolio by having to sell your securities at a low point in the markets. While a cash wedge can drag down the long-term returns of your portfolio, it could boost your short-term returns during bear markets and is well worth sacrificing the extra returns to protect your capital and limit the downside risk of your portfolio.

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Rob’s personal finance reading list

Has COVID-19 changed your financial values?

Barbara Stewart, an expert on financial behaviour, writes about some of the changes she’s made in her spending priorities in the pandemic. A surprising mix of both reducing and adding risk.

A test of your driving savvy

Avoid costly accidents by knowing the rules on who has right of way in various situation. Here’s a guide for several common scenarios.

Eight ways you can get tripped up with TFSAs

Potential traps that even long-time users of tax-free savings accounts might not know about.

Something new in credit card rewards and savings

A detailed look at a new player in credit cards called Neo Financial. Rewards are awarded at the cash register when you buy from various partners rather than piling up as points or miles.

Today’s financial tool

How to register for a free CRA My Business account, which makes it easy to manager your GST/HST, income tax and more.

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The money-free zone

I’m really enjoying following God on Twitter.


What I’ve been writing about
  • The five most important numbers for checking the health of your personal finances
  • There’s a cost in money, isolation and family stress when seniors choose to remain in their own private homes
  • This is why your bond ETF is doing great, even while everyone hates bonds (for Globe Unlimited subscribers)

More Rob Carrick and money coverage

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