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Tips to prepare for a potential recession in Canada

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Although a 2023 recession isn’t guaranteed, economic indicators point to the fact that we could very well face an economic downturn early next year.

On December 7, the Bank of Canada increased its overnight rate by an additional 50 base points in an effort to cool down recent inflation. This, combined with RBC analysts’ prediction of a recession during the first quarter of 2023, hints at a possible economic pullback next year.

Regardless of whether or not the country sees a recession in the near future, it’s still a good idea to create a financial action plan to help mitigate your risks. Below, I’ll share some practical tips to help you and your family prepare, but first let’s go over what exactly happens during a recession.

What happens in a recession?

Bank of Canada Governor Tiff Macklem remarked in a public statement issued on November 14 that “Slowing economic growth will disproportionately affect our most vulnerable households. High inflation and high-interest rates to combat inflation put an additional burden on our lowest-income households.”

During a recession, the country’s GDP tends to decrease as some industries earn less revenue.

Some potential outcomes of a recession are:

  • Increased unemployment and job loss
  • Reduced spending by consumers, which hurts businesses
  • Price drops in housing markets
  • Stock market pullback, which results in investor losses

Financial action plan tips for a potential recession in 2023

When it comes to your personal finances, it’s good practice to prepare for the worst. With Canada’s top economists predicting a recession, consumers should take note and plan accordingly.

Here are some actionable steps that you can take to limit the recession’s effect on your finances.

1. Evaluate your investment risk

Now’s the time to look at your investments to see if you’re satisfied with how much risk you are exposed to.

Higher-risk investments have a higher potential to incur more investment losses than a lower-risk investment would. The classic example of this is higher-risk investments such as stocks versus lower-risk investments such as bonds. During a recession, stocks generally sustain larger losses than bonds.

This can cause a lot of sleepless nights and stress if your portfolio value starts dipping too low during a recession than what your risk tolerance allows.

Take a free investor questionnaire online to see if your current investments align with your risk tolerance. If you’re exposed to too much risk, consider adjusting your portfolio to something with lower risk, such as fixed-income, GICs, or high-interest savings accounts.

2. Pay down high-interest debt

If you have open credit lines that are subject to variable interest rates, then expect these to increase during a recession. Thanks to the central bank’s recent interest rate hikes, Canadians are seeing much higher interest rates and increased fees imposed by their creditors.

Before interest rates increase too much, it’s a good idea to pay your debt down as much as you can. The lower your principal balance is, the less you’ll end up forking over interest payments.

It’s best to be proactive here, as you’re less likely to have extra funds available during a recession.

3. Build your emergency savings

Increased inflation and higher prices for everyday services and essentials can be hazardous to your savings. With a potential recession looming in the next few months, this is something to be very wary of.

Instead of burning through your savings, try your best to cut back on expenses and use that money to build your emergency savings. If you’re unsure where to start, look at the three big areas where you can potentially cut back on spending; your housing, transportation, or food. I find that most people usually have one area where they are overspending on.

Economic recessions can often result in unforeseen circumstances, such as job loss, reduced hours, and pay cuts. If you were counting on a bonus, this might be postponed as well.

The more you have saved, the easier it will be to deal with these sudden changes so that you don’t fall behind on your bills or find yourself unable to provide for your family.

4. Optimize your resume

Unemployment and reduced hours are very common in a recession, as businesses cut down on non-essential positions. One of the best ways to improve your job security is to continue providing value and to go above and beyond the base requirements of your position.

However, you should also be prepared for potential job loss. If your hours are cut, you may also need to pursue a second job.

To speed up the process, you should revise and optimize your resume, ensuring that you have a backup plan if your job goes south.

5. Reevaluate your monthly budget

If you don’t have a clear monthly budget, then you’re likely spending more than you should be. Whether you’re single or living in an economic family, I recommend sitting down and going over your income and spending to create a budget that allows you to save more money.

Calculate your monthly income and determine how much you spend on bills, fuel, groceries, and other necessary expenses. Then, try to find categories where unnecessary spending can be cut.

6. Postpone expensive purchases

If you were thinking of buying a new car, a recreational vehicle, remodelling your home, or going on an expensive vacation, it might be best to postpone the unnecessary expenditure. If a recession occurs, the cost of many of these things may naturally decrease, which means that you will have spent the extra money for no reason.

Additionally, many of these types of expenses aren’t a necessity. To ensure that you’re adequately prepared for a recession, it’s better to divert these funds to your emergency savings.

The bottom line

As Benjamin Franklin famously stated, “If you fail to plan, you are planning to fail.”

It’s very possible that Canada could see a recession in early 2023. Even though it’s not a guarantee, you should still prepare your finances by cutting down on unnecessary spending and building your savings.

Even if the economy changes from its current course, then you’ll still be better off for your preparation, as you’ll have saved more and increased your financial value.

Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website.

 

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Bad traffic, changed plans: Toronto braces for uncertainty of its Taylor Swift Era

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TORONTO – Will Taylor Swift bring chaos or do we all need to calm down?

It’s a question many Torontonians are asking this week as the city braces for the arrival of Swifties, the massive fan base of one of the world’s biggest pop stars.

Hundreds of thousands are expected to descend on the downtown core for the singer’s six concerts which kick off Thursday at the Rogers Centre and run until Nov. 23.

And while their arrival will be a boon to tourism dollars — the city estimates more than $282 million in economic impact — some worry it could worsen Toronto’s gridlock by clogging streets that already come to a standstill during rush hour.

Swift’s shows are set to collide with sports events at the nearby Scotiabank Arena, including a Raptors game on Friday and a Leafs game on Saturday.

Some residents and local businesses have already adjusted their plans to avoid the area and its planned road closures.

Aahil Dayani says he and some friends intended to throw a birthday bash for one of their pals until they realized it would overlap with the concerts.

“Something as simple as getting together and having dinner is now thrown out the window,” he said.

Dayani says the group rescheduled the gathering for after Swift leaves town. In the meantime, he plans to hunker down at his Toronto residence.

“Her coming into town has kind of changed up my social life,” he added.

“We’re pretty much just not doing anything.”

Max Sinclair, chief executive and founder of A.I. technology firm Ecomtent, suggested his employees avoid the company’s downtown offices on concert days, saying he doesn’t see the point in forcing people to endure potential traffic jams.

“It’s going to be less productive for us, and it’s going to be just a pain for everyone, so it’s easier to avoid it,” Sinclair said.

“We’re a hybrid company, so we can be flexible. It just makes sense.”

Swift’s concerts are the latest pop culture moment to draw attention to Toronto’s notoriously disastrous daily commute.

In June, One Direction singer Niall Horan uploaded a social media video of himself walking through traffic to reach the venue for his concert.

“Traffic’s too bad in Toronto, so we’re walking to the venue,” he wrote in the post.

Toronto Transit Commission spokesperson Stuart Green says the public agency has been working for more than a year on plans to ease the pressure of so many Swifties in one confined area.

“We are preparing for something that would be akin to maybe the Beatles coming in the ‘60s,” he said.

Dozens of buses and streetcars have been added to transit routes around the stadium, and the TTC has consulted the city on potential emergency scenarios.

Green will be part of a command centre operated by the City of Toronto and staffed by Toronto police leaders, emergency services and others who have handled massive gatherings including the Raptors’ NBA championship parade in 2019.

“There may be some who will say we’re over-preparing, and that’s fair,” Green said.

“But we know based on what’s happened in other places, better to be over-prepared than under-prepared.”

Metrolinx, the agency for Ontario’s GO Transit system, has also added extra trips and extended hours in some regions to accommodate fans looking to travel home.

A day before Swift’s first performance, the city began clearing out tents belonging to homeless people near the venue. The city said two people were offered space in a shelter.

“As the area around Rogers Centre is expected to receive a high volume of foot traffic in the coming days, this area has been prioritized for outreach work to ensure the safety of individuals in encampments, other residents, businesses and visitors — as is standard for large-scale events,” city spokesperson Russell Baker said in a statement.

Homeless advocate Diana Chan McNally questioned whether money and optics were behind the measure.

“People (in the area) are already in close proximity to concerts, sports games, and other events that generate massive amounts of traffic — that’s nothing new,” she said in a statement.

“If people were offered and willingly accepted a shelter space, free of coercion, I support that fully — that’s how it should happen.”

This report by The Canadian Press was first published Nov. 13, 2024.



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‘It’s literally incredible’: Swifties line up for merch ahead of Toronto concerts

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TORONTO – Hundreds of Taylor Swift fans lined up outside the gates of Toronto’s Rogers Centre Wednesday, with hopes of snagging some of the pop star’s merchandise on the eve of the first of her six sold-out shows in the city.

Swift is slated to perform at the venue from Thursday to Saturday, and the following week from Nov. 21 to Nov. 23, with concert merchandise available for sale on some non-show days.

Swifties were all smiles as they left the merch shop, their arms full of sweaters and posters bearing pictures of the star and her Eras Tour logo.

Among them was Zoe Haronitis, 22, who said she waited in line for about two hours to get $300 worth of merchandise, including some apparel for her friends.

Haronitis endured the autumn cold and the hefty price tag even though she hasn’t secured a concert ticket. She said she’s hunting down a resale ticket and plans to spend up to $600.

“I haven’t really budgeted anything,” Haronitis said. “I don’t care how much money I spent. That was kind of my mindset.”

The megastar’s merchandise costs up to $115 for a sweater, and $30 for tote bags and other accessories.

Rachel Renwick, 28, also waited a couple of hours in line for merchandise, but only spent about $70 after learning that a coveted blue sweater and a crewneck had been snatched up by other eager fans before she got to the shop. She had been prepared to spend much more, she said.

“The two prized items sold out. I think a lot more damage would have been done,” Renwick said, adding she’s still determined to buy a sweater at a later date.

Renwick estimated she’s spent about $500 in total on “all-things Eras Tour,” including her concert outfit and merchandise.

The long queue for Swift merch is just a snapshot of what the city will see in the coming days. It’s estimated that up to 500,000 visitors from outside Toronto will be in town during the concert period.

Tens of thousands more are also expected to attend Taylgate’24, an unofficial Swiftie fan event scheduled to be held at the nearby Metro Toronto Convention Centre.

Meanwhile, Destination Toronto has said it anticipates the economic impact of the Eras Tour could grow to $282 million as the money continues to circulate.

But for fans like Haronitis, the experience in Toronto comes down to the Swiftie community. Knowing that Swift is going to be in the city for six shows and seeing hundreds gather just for merchandise is “awesome,” she said.

Even though Haronitis hasn’t officially bought her ticket yet, she said she’s excited to see the megastar.

“It’s literally incredible.”

This report by The Canadian Press was first published Nov. 13, 2024.

The Canadian Press. All rights reserved.



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Via Rail seeks judicial review on CN’s speed restrictions

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OTTAWA – Via Rail is asking for a judicial review on the reasons why Canadian National Railway Co. has imposed speed restrictions on its new passenger trains.

The Crown corporation says it is seeking the review from the Federal Court after many attempts at dialogue with the company did not yield valid reasoning for the change.

It says the restrictions imposed last month are causing daily delays on Via Rail’s Québec City-Windsor corridor, affecting thousands of passengers and damaging Via Rail’s reputation with travellers.

CN says in a statement that it imposed the restrictions at rail crossings given the industry’s experience and known risks associated with similar trains.

The company says Via has asked the courts to weigh in even though Via has agreed to buy the equipment needed to permanently fix the issues.

Via said in October that no incidents at level crossings have been reported in the two years since it put 16 Siemens Venture trains into operation.

This report by The Canadian Press was first published Nov. 13, 2024.

Companies in this story: (TSX:CN)

The Canadian Press. All rights reserved.



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