10 financial planning tips for new caregivers

Blog post - 10 financial tips

Being a caregiver impacts every aspect of your life, including your finances. Your expenses may go up, your income may go down, and you may need to make some financial decisions. To help you navigate your finances at the beginning of your caregiving journey, certified financial planner and chartered investment manager, Shannon Lee Simmons offers the following top 10 tips.

  1. Pace yourself while you get your financial bearings – give yourself time to adjust to your new reality and gain an understanding of what your new expenses will be and for how long. Shannon advises that it is ok to pause your savings or investments in the short term.
  2. Map out a plan in micro-timelines – instead of focusing on long term financial goals, focus on what your financial needs and obligations are in the next few weeks or months.
  3. Determine what impact caregiving will have on your income – will you be able to keep working full time? Will you need to reduce your work hours and if so, what impact will that have on your earnings?
  4. Get a handle on your expenses – make a list of your fixed expenses, such as rent or mortgage, property taxes, car payments, etc. All the bills that need to be paid consistently should add up to less than 55% of your net income. Next, add up what you spend, on average, on everything else including RRSP contributions and expenses like groceries, clothing, transportation, maintenance, entertainment, etc. If you have exceeded 100%, or you are close to it, you’ll need to make some changes.
  5. Look for ways to reduce expenses – for example, can you cut back on cable, turn heating or air conditioning down, trade in your car for a less expensive one? Be realistic about the changes you can make. To say, “I’ll cut my spending in half” may be unachievable, or to say “I’ll never buy new clothes or order take-out again,” is impractical.
  6. Be realistic about your investments – now might not be the time to be aggressive with your investments. While it is still important to make RRSP contributions (especially if you are younger), you may need to adjust your contribution amounts.
  7. Prioritize paying off consumer debt – paying down credit card or credit line debt will give you more money to work with and will also be one less thing to worry about in the future.
  8. Save for emergencies – having an emergency fund will give you peace of mind and it can help keep you out of debt. “Going into debt because of an emergency is like kicking yourself when you’re down,” says Shannon. Look for a high interest rate, non-invested savings account that doesn’t charge any fees. And make sure it’s Canadian Deposit Insurance Corporation (CDIC) insured.
  9. Talk to a tax expert – a tax expert can advise you on any applicable government tax credits that might benefit you and/or your care recipient, such as the medical tax credit and the disability tax credit. Be sure to look for an accountant or other tax preparer who has experience working with people in similar situations to yours.
  10. Get financial planning advice – talk to a financial planner to get an unbiased look at your expenses and help you map out a short-term and long-term plan. It is important to find a person that is not trying to sell you any products (such as investment or insurance plans). “Financial planning is a form of self-care for caregivers,” says Shannon.

Source: The above content was adapted, in part, from an Ontario Caregiver Organization webinar presented by Shannon Lee Simmons, an award-winning Certified Financial Planner, Chartered Investment Manager, speaker, author and founder of the New School of Finance. Her two books, Worry-Free Money and Living Debt-Free, are best sellers. She is a personal finance writer for the Globe and Mail and CBC Radio’s Metro Morning money columnist and financial expert on The Marilyn Denis Show.

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