Despite the global hardships of COVID-19, Jelani Smith has been “quite successful” both professionally and financially this year. But — he’s quick to add — “I don’t want to sound cocky.”
He’s well aware that the crisis has not been kind to the coffers of many Canadians. But prudent planning, meticulous money management and hard work have landed the 26-year-old real estate agent on the plus side.
Since May he’s acquired two investment properties that will yield extra income to help secure his financial future.
“I’ve just saved a lot and I’m spending wisely,” explains Smith, whose gas and dining-out costs are $ 500 to $ 700 a month lower since COVID-19 brought the world to a standstill.
It’s a similar story for others who’ve been able to continue to work and earn a decent income amid COVID-19 restrictions and safety protocols. With fewer ways and places to spend money, they’re able to sock away more.
“We’re definitely seeing a silver lining,” says Eric Snyder, international operations director for Credit Karma.
In a survey in June, the personal finance website found that a third of respondents are saving more now than before the coronavirus outbreak in mid-March.
Almost half said the primary reason was because they’re not going out socially, and many have also cut back on vacations, travel, driving, commuting, clothing, child-care costs and extracurricular activities for kids.
Of those able to set money aside, 41 per cent were putting it toward long-term plans and 33 per cent were saving for short-term emergencies.
Snyder notes the pandemic is also driving people to build healthy financial habits like trimming daily expenses, tracking their spending and setting a budget.
According to Statistics Canada, households spent 13.7 per cent less in the second quarter of this year. At the same time, Canadians saved 28.2 per cent of their disposable income — boosted by government aid — up from 7.6 per cent in the previous quarter, StatCan reported.
The Bank of Canada observed an unprecedented increase in deposits in personal bank accounts in April, with higher savings continuing into subsequent months.
“Without restaurants or movie theatres to go to, money simply accumulated in household bank accounts,” the bank’s deputy governor, Lawrence Schembri, said in June. But he added that many people may have deliberately built a safety net in the face of an uncertain future.
Smith was fortunate to benefit from a quickly reheated real estate market following the slowdown in early spring. By mid-September, the agent with Zoocasa Realty Inc. had clinched 43 deals.
When showings picked up, Smith’s new spending habits prevailed. Now he’s cooking and eating more at home and he’s also cut back on trips to the mall, where he’d typically spend $ 100 to $ 250, mostly on clothes. A shopping trip in August was his first in months. He’s also saving $ 70 a month by having his roommate do his biweekly haircuts.
“Every dollar does help,” he says.
Smith, a first-time homebuyer in 2016 when he was still in university, used equity from his Scarborough townhouse to purchase a bungalow that he’s just renovated and converted to a legal duplex. Once the two apartments rent out for a total of $ 4,800 per month, he’ll have a $ 2,000 positive cash flow after expenses.
In keeping with his strategy to “buy, renovate, rent, refinance and repeat,” he recently purchased a second investment property in Guildwood Village in a joint venture with a business partner.
The extra income from both properties will go into long-term savings, the stock market and his RSP, says Smith, founder of a millennial finance hub called Bay Street Blog.
Saving their sanity is more top-of-mind for the Semerak family, who are spending $ 500 to $ 1,000 less each month. That surplus cash, some of which goes toward their mortgage, will more than cover the interest on financing to finish the basement of their Milton home, giving the family of four more space in the event of another lockdown, says Dave Semerak.
“We’re one of the lucky families” with a steady income and full-time jobs, the investment adviser says of wife, Rie, an executive assistant, and their sons, aged 10 and 14.
At the same time, “I don’t want to be boastful” while others are struggling, adds Semerak, a senior wealth adviser with Meridian Credit Union who shows people how to grow their savings. “I want to be respectful of what other people are going through.”
Now that he works from home part of the week, he’s eliminated $ 3 or $ 4 for every Starbucks stop, $ 20 for each lunch out, and he’s seeing “big savings” on gas for the 120-kilometre round-trip to the office.
The family saved $ 5,000 by cancelling a trip to Disney World in Florida (although almost half of that is in the form of an airline credit), and got a $ 250 refund from one son’s soccer league. They’ve also cut their dining-out tab to $ 60 from $ 100 by doing “takeout Fridays.”
Still, Semerak’s a bit conflicted about borrowing money for their home improvement project even though it’s affordable now. But if interest rates rise, “that will not be pretty,” he says. “The debt scares me.”
In his professional capacity, he says his older clients, who tend to have significant savings, are looking for a bigger return but without too much risk. The one or two per cent they’d get from a GIC just doesn’t cut it, says Semerak, adding that speaking to a financial adviser “will unlock other opportunities” to fatten piggy banks.
Credit Karma’s Snyder offers a final word of encouragement to those who are struggling, noting that progress isn’t always linear.
“Be kind to yourself; you’ll get there.”