Three ways you can use lockdown to make your finances 'antifragile'

Martin Pelletier: You too can thrive and grow when exposed to volatility, randomness, disorder and stressors

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It has now been five months since the COVID-19 pandemic forced us all into lockdown, and the effects are starting to show. Relationships are being tested with family members being in close quarters; household finances are being challenged due to the loss of jobs or reduced income; and nerves are being frayed as people worry about the health of their loved ones and the future.

Making matters worse is that just when we appear to be turning a corner with the economic restart, infection rates have begun rising again. That has left many wondering if their lives will ever return to where they were prior to the virus. Meanwhile, many companies are telling their employees to not expect to return to work until next year at the earliest and we are being warned that mask-wearing and physical distancing could be the norm for several years, even with a vaccine.

Essentially our lives have been severely disrupted, and during such times it really helps to become what the economist Nassim Nicholas Taleb calls antifragile.

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“Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Yet, in spite of the ubiquity of the phenomenon, there is no word for the exact opposite of fragile. Let us call it antifragile,” Taleb wrote in his book Antifragile: Things That Gain From Disorder. “ Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better.”

In other words, you have to decide to not only keep moving forward past the chaos and the obstacles but also to use them as a way to evolve and come out stronger than before.

While the concept of antifragility can be applied in all areas of life, it can be particularly useful when it comes to financial security. Here are three ideas that we think are great first steps toward making your financial lives antifragile in the midst of the pandemic.

Get a financial plan

A recently released report by Edward Jones and Age Wave shows that only 39 per cent of adults are confident in their ability to retire, which is down from 54 per cent prior to the pandemic. Nearly three-quarters of those who plan to retire have no idea what their healthcare and long-term costs will be. This is concerning as “three-quarters of Canadians over age 65 have one or more chronic conditions, such as heart disease, stroke, cancer, pulmonary disease, diabetes, arthritis, or Alzheimer’s disease or other dementias.”

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Only 39% of adults are confident in their ability to retire, which is down from 54% prior to the pandemic

All of this worry can be avoided by undertaking a thorough review of one’s overall situation via a financial plan which will map everything out including the potential risks. Then stress test the plan to see how it will impact your overall lifestyle under different scenarios. This will be incredibly helpful in the event there happens to be major change in one’s life including the death in the family, an illness causing disability, a divorce, or the loss of a job.

Review your will and estate

A proper financial plan will also flush out actionable steps such as ensuring your goals and objectives are properly reflected in your will. This couldn’t come at a more important time as we find it shocking that only 49 per cent of Canadians have a will in place, according to a 2018 the Angus Reid Institute poll.

There are also a number of different tax and insurance strategies that can be extremely helpful in helping you achieve your financial goals that can also be identified and explored coming out of the planning process.

Build out your team of trusted advisors

Finally, build out your trusted team of advisors as they will be a great resource when it comes to helping you navigate life’s challenges including this current one. Start by listing them out including those advising on your legal, accounting, tax and estate, and investments and then introduce them to each other so they not only all know who is on your team but can all start working together.

Getting organized, identifying areas of risk, and building a team of experts will provide tremendous comfort in dealing with life’s black swans and unexpected events.

Martin Pelletier, CFA, is a portfolio manager at Wellington-Altus Private Counsel Inc. (formerly TriVest Wealth Counsel Ltd.), a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/oversight and advanced tax and estate planning.

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