This article originally appeared on VICE Canada.
Panic about the spread of coronavirus (COVID-19) and what it will do to the economy caused stock markets in North America to crash Monday. The TSX, Canada’s main stock market, lost more than 10 percent in its worst day since the collapse of 1987 as the price of oil tanked.
Fears about public gatherings have canceled sporting events and conferences like SXSW and Collision, a tech event in Toronto.
All of this affects airlines, banks, jobs, and the economy. But it raises some interesting questions—like is this a good time to buy stocks? What about booking a vacation? Or buying a house?
If you’re on the verge of stockpiling a metric ton of toilet paper but think there might be a smarter way to spend your money, we’ve answered your most pressing coronavirus-related personal finance questions.
Are flights and travel going to be cheaper?
People aren’t traveling as much right now because they’re scared, or government and employer-imposed travel restrictions have messed up their plans. Already, we’ve seen fares go down in price and airlines waiving fees to change flights.
A roundtrip from Toronto to Cancun on Interjet, departing this month or in early April, is $165 (it typically costs $600 to $1,000). As of publication time, return airfare from Toronto to Edmonton on Flair Airlines at the end of the month was $286, nearly half of what it usually costs.
Based on the travel disruptions coronavirus has already caused, commercial air traffic is on track to drop by an estimated 8.9 percent this year, the biggest decline since 1978. So a lot of airlines are flying planes with empty seats, reducing routes, or offering deals.
Should I book a cheap vacation?
According to Robin Taub, the author of Raising Money-Smart Kids, even if you’re young and healthy, there are ways that booking a trip during the coronavirus outbreak could cost you.
Traveling to a higher-risk area (or one that becomes one while you’re there) means that you might need to self-quarantine when you get back. If you’re a gig worker, or you don’t have sick days, that means losing out on two weeks of pay.
There’s also the risk of being exposed to the coronavirus while you’re away and ending up stranded. If you’re quarantined in another country, you’re potentially going to pay a lot more on accommodations than you originally planned on. Changing a flight last-minute could also be costly.
Though the statistical risk is low, if you get sick while abroad, you could get stuck with a lot of medical bills, even if you have travel insurance. “A lot of times you still have to pay up front, and then you get reimbursed. So if you’re thinking about going somewhere, look into what plans offer, what are you covered for, and more importantly, what is excluded,” said Taub.
What if I’ve booked a trip and am having second thoughts?
If reading this makes you want to cancel your flight, read the fine print in your travel agreement. A pandemic won’t get you your money back (a death in the family or an injury or illness that prevents you from traveling will, as long as you can prove it) unless you’ve paid extra for insurance that allows you to cancel for any reason.
Should I book my 2021 vacation now?
Taub advised against booking too far in advance, even if you’re tempted to lock in cheap flights and hotel rates. A lot can happen in the next year and if you need to make changes to your plans, you’ll likely be charged fees, which cancel out any deals you score.
Is now a good time to buy stocks?
If you have extra cash, experts say now may be a good time to get into the stock market, but only if you’re in it for the long-term (10 years or more). If you will need that money in the next few years, to buy a first home for example, then the stock market isn’t the right place to park your money.
Personal finance expert Bruce Sellery said spreading out your investments in different stocks, over a few weeks, is the safest move because no one knows how long the sell-off will last. It could take two months to hit the bottom, like it did during the 2008 financial crisis.
Sellery said to consider putting a third of your cash into stock this week, a third a few weeks from now, and the rest a month after that. This is based on his experience covering big sell-offs such as the dot-com crash, 9/11, SARS, and the financial crisis as a business journalist in the U.S. and Canada.
What we’re seeing now is concern about some of the worst-case scenarios, including a lengthy recession. But by getting into the stock market in stages—or staying in if you’re already invested—you stand to benefit when things go back to some semblance of normal and businesses bounce back.
What if you’re already invested in the stock market?
Take a breath. And do nothing.
Ideally, you’re in it for the long-term and unless you sell right now, you’ve only lost money on paper. The headlines you see might scare you, and this might be just the start, but getting out during a sell-off is usually a mistake.
“If you’re already in, hang on. It could get worse but in general, economies are resilient and will bounce back over time,” said Taub.
Is now a good time to buy a home?
While the stock market reacts quickly to a potential pandemic, it takes a lot longer for home prices to feel the impact. So far hot markets haven’t slowed down much; in fact, Toronto is heating up again as we approach spring, the busiest buying season. If you’re looking to buy property in a hot market where bidding wars are common, Taub said you should look for signs like homes selling for less than the list price.
“There could be supply coming on and perhaps less demand if people are nervous about the future, if people are worried about their jobs, or their ability to make money in this environment. More supply and less demand in this environment could push prices down,” Taub said. She sees potential opportunities in the small condo market, which is often a first home purchase.
Fears about coronavirus and the economy mean getting a variable-rate mortgage, which is tied to the central banks’ main interest rate (as opposed to a fixed-rate mortgage, which locks you in a rate for typically five years), has gotten cheaper. On Friday, the Bank of Canada lowered its key lending rate and in February the federal government relaxed mortgage qualification rules. The U.S. Federal Reserve also cut its key interest rate last week.
But Taub said lenders might become more conservative.
“Usually, when something like this happens and there’s a lot of panic and fear, the lenders get more concerned and instead of just throwing money at people and making it very easy to qualify they start to look a little harder,” she said.
According to Sellery, you should probably take a hard look at whether you will be able to afford your mortgage if a recession hits and you lose your job. If enough people lose confidence in the economy and cut back on doing things and spending, that could cause an economic downturn. We haven’t had one since June 2009 although historically the U.S. goes through a recession nearly every five years—so you could argue that it’s overdue.
Unless you have a really good reason to get in now, Sellery suggests waiting until after the spring buying frenzy. Chances are, mortgage costs will still be low so you’re not missing out.
“If you were to buy six months to a year from now, rates aren’t going to go up that much in the short-term—they’re going to take a long time to be materially higher than they are today,” he said.
Should I buy a year’s supply of toilet paper?
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