DEBT. SAVINGS. INVESTING.
All our experts agree that communication with your partner and paying off debt are both vital recession-proofing strategies. Sara Dimerman, a relationship and family therapist, advises that when it comes to being on the same page about money, having an understanding of your partner’s background is key. For example, if your mate lived at home with her parents until you moved in together, they may not have learned to be responsible for expenses like rent and groceries. Dimerman says couples need to identify financial differences and work through them, even calling on a therapist if they need help doing so. “Along with understanding your partner’s personal history, it’s critical that you discuss how to handle money as a couple.”
......For long-term debt reduction, Sandra Foster, fellow of the Canadian Securities Institute and author of Who’s Minding Your Money? Financial Intelligence for Canadian Investors, reminds couples of a very basic rule: “Don’t use credit cards unless you can pay them off every month. If you have a card charging 28 percent interest, look at moving to a lower-interest card with nine or 10 percent.” (Compare credit card and bank rates at Bankrate.ca.) But if you’re really serious about cracking down, Robert Abboud, certified financial planner and author of No Regrets: A Common Sense Guide to Achieving and Affording Your Life Goals, advises cutting up your cards altogether: “Most people aren’t used to living within their means,” he says. “Live on cash! Stop using plastic; it isn’t real.” As Alison Griffiths, host of Maxed Out on the W Network, adds, “The very best debt-reduction strategy for recessionary times is to live lean and learn to live with less.”
As for recession-proofing your bank account, Foster says couples should have an emergency fund to cover three to six months of living expenses. If you can’t manage that, save as much as you can in a high-interest account such as those from ING, ICICI or President’s Choice Financial. In a financial emergency, you can remove funds from your RRSP, but try and avoid it if you can. Money taken out of an RRSP will be subject to taxes, so it’s best to check with your financial institution. You may be better off with a loan.
......Once you’re working well as a team in an effort to get your finances in good shape, it’s time to look into solid investment strategies. Griffiths suggests that young couples invest in low-fee, diverse, index mutual funds or exchange-traded funds (ETFs) over a long-term basis. “This kind of investment will help to recession-proof your portfolio,” she says.