The Question Most Canadians Have Never Been Asked About Their Money: What Will You Do in a Bad Year?
The question is this. What will you do in a bad year?
Most people have never been asked it. Not by their advisor. Not by their spouse. Not by themselves.
This is not a warning about anything. There is no market view here and no prediction about what happens next. It is a question that is straightforward to answer on a good day and close to impossible to answer on a bad one.
Being prepared and knowing what you will do are not the same thing. Most people have done the first. Reserves, coverage, a plan on file. Very few have done the second.
Here is what to decide while things are still going well:
- What stays true regardless of what the numbers do
- What you actually did the last time things went badly
- Which decisions come off the table entirely, no matter how bad it gets
- What absorbs the shock first, and in what order
- What never gets cut, no matter what
- Who you call before you decide anything
- What you want that person to say to you when you are not yourself
Seven answers. About an hour. None of them require knowing what is coming.
What Is a Bad Year Plan?
A bad year plan is a short written set of decisions made in advance about how you will respond when something goes wrong.
It is not a market outlook. It is not a portfolio strategy. It contains no forecasts.
It exists because financial decisions made under stress are reliably worse than the same decisions made calmly, and because the only time you can write instructions for a stressed version of yourself is when you are not stressed.
Most Canadians have never written one. Most have never been asked to.
What Counts as a Bad Year?
Most people picture one kind. Markets fall, portfolios drop, headlines get loud.
That is one of four.
A market year. Investments fall meaningfully and stay down long enough that it stops feeling temporary. The damage is not the decline. It is selling into it, or changing a long-term structure because of a short-term number.
An income year. A job ends. A contract does not renew. Hours get cut. A business has a bad stretch. Income falls while every fixed cost stays exactly where it was. The damage is usually debt taken on quietly, or savings drained in an order nobody chose.
A health or family year. Illness, a parent who suddenly needs care, a death, a marriage that ends, an adult child in trouble. The damage is decisions made while grieving, and money moved to solve a problem that money does not solve.
A business year. A key employee leaves. A client concentration turns into a client loss. A partner disagreement becomes a partner exit. The damage is often the personal balance sheet being used to hold up the business balance sheet, with no line drawn in advance.
Two things are worth noticing.
These arrive together more often than they arrive alone. A health year becomes an income year. A business year becomes a market year, because the same recession is driving both.
And almost everyone prepares for one of the four. Usually the market one, because it is the one that gets written about. The other three tend to be the ones that actually show up.
A plan that only covers markets is not a bad year plan. It is an investment policy.
Why Do Good Decisions Break Under Pressure?
Financial decisions made under stress fail for reasons that have nothing to do with intelligence or information.
Your options narrow before your thinking does. Under real stress, the mind stops generating alternatives. You do not weigh six options badly. You see two, and one of them feels unbearable.
The clock speeds up. Almost nothing in a financial life needs to be decided this week. Almost every bad decision feels like it does. The urgency comes from the discomfort, not from the situation.
Doing something relieves fear. Doing nothing does not. Selling relieves the fear of further loss the moment you do it. That is exactly why it is so hard to resist and so often wrong.
The number becomes the whole world. In a bad market year, people check accounts more often, not less. Every check confirms the fear.
You will not feel panicked. You will feel clear. This is the part that catches thoughtful people. You do not experience yourself as reacting. You experience yourself as finally seeing the situation for what it is. The certainty is the symptom.
More information does not fix this. Under stress, people do not gather information neutrally. They go looking for the piece that confirms what they already want to do, and in any given year a well-argued case exists for almost anything.
Morgan Housel makes the point in The Psychology of Money that the most important part of any plan is planning on the plan not going according to plan.
As Carl Richards puts it, “risk is what’s left over when you think you’ve thought of everything.” The bad year you have modelled in detail is rarely the one that arrives.
Which is an argument for simple rules decided in advance, not detailed ones decided in the moment.
What Should Be in a Bad Year Plan?
Five parts. All of them answerable on a good day. None of them answerable on a bad one.
1. What stays true regardless
One sentence about what does not change when the numbers change. The reason the money exists. What you would still be trying to protect if the balance were a third lower.
For some people that is about a person. For some it is about staying in one place. For some it is about not being a burden. It does not need to sound good. It needs to be true and it needs to be in your own words.
Everything else gets tested against it.
2. What you did last time
Start with what has already happened, not with what might.
You have been through a bad year before. Maybe 2008. Maybe 2020. Maybe 2022. Maybe a year that had nothing to do with markets.
Three questions:
• What did you actually do? Not what you believe about yourself. Did you sell anything, stop contributing, stop opening statements, cut spending, and what did you cut first?
• What did you almost do? Most people have a decision they came very close to making and did not. That is your pattern.
• What did it feel like at three in the morning? People usually have one recurring fear, and it is more specific than losing money.
This is evidence, not prediction. You have already run the experiment. Most people have simply never looked at the results.
3. What comes off the table
Some decisions cannot be undone. Sell the property and you do not get it back at that price. Start a pension early and the reduction is permanent. Collapse a corporate structure and rebuilding costs more than building did.
Name the three or four decisions that come off the table in a bad year, no matter how bad it gets.
Not because they are always wrong. Because they should never be made on a compressed timeline by someone under pressure.
The rule is about speed, not about the option. If one of them still looks right after the pressure comes off, it is available.
4. What gives first
In a bad year, something absorbs the shock. If you have not chosen what, the choice gets made by whatever is easiest to reach, which is usually the investment account, because you can sell it on a Tuesday afternoon without telling anyone.
Set the order in advance. Not amounts. Not thresholds. Just sequence. For most people it runs something like:
- Large discretionary spending. Vehicle replacement, renovation, a major trip. Not the small pleasures, which cost little and hold quality of life together.
- Timing. Delay rather than cancel. Delay is cheaper than reversal.
- Cash and short-term reserves. This is what they are for. Using them is not failure. Using them is the plan working.
- Work. More hours, a delayed exit, part-time. Unwelcome, and often the most effective lever available.
- The portfolio, last and by design.
Then name what does not give at all. There is usually one thing that stays funded regardless, because cutting it would defeat the purpose of the money entirely. Say what it is now, so it does not quietly become the first casualty.
5. Who you call, and what you want them to say
Name the person you speak to before making any decision on the off-the-table list. One person, or two. Not a committee. Before, not after.
Their advantage is not better information. It is that they are not in your emotional state.
Then write, in your own words, what you want said to you when you are not yourself.
Some people want a fact. What the income floor actually is. That the mortgage is gone. Some want a person named. Some want a direct instruction, along the lines of tell me to wait ninety days, or remind me that I always want to sell and I have always been wrong about it.
Write it the way you would say it out loud. That sentence carries more weight coming from the calm version of you than from anyone else, because it is not advice. It is your own instruction.
What Has to Be in Place for Any of This to Work?
A bad year plan assumes a foundation. In most households it is partly there and partly not, and the gaps are rarely anyone's fault.
The most common version is that one person handles all of it. Not through secrecy, just through a division of labour that worked for thirty years. It holds until the year that person is the one who is unwell, or gone.
- Reserves. Cash is not there for emergencies. It is there so you are never forced into a decision on someone else's timeline. Without it, nothing gives first except the portfolio.
- Disability and life coverage. These determine whether an income year or a health year gets absorbed or transferred straight onto the balance sheet.
- A current will and powers of attorney. Without them, a health year becomes a health year and a legal one at the same time. See our Estate Planning Basics Guide.
- A life file. In a bad year someone has to find things. If that information lives in one head, a difficult year gets much harder for everyone else in it. See How to Build Your Life File.
- A conversation already held. The call only works if it is a continuation of something. See The Family Meeting Guide.
All five are straightforward to put in place during a good year and close to impossible during a bad one. Which is the same argument as everything else here.
What If You Are Already in a Bad Year?
Then some of this arrives too late, and it is worth saying so plainly.
If what happened is a loss rather than a market, most of the above is not your situation. You are not talking yourself into a decision. You are being asked to make a dozen of them by people who need answers this week.
Two things still hold.
Very little has to be decided quickly. The decisions that cannot be undone will still be there in ninety days, and you will be a steadier person reading them.
And the call still matters. Before the decision, not after, to someone who is not carrying what you are carrying.
If the year turned on a death, Losing Your Spouse or Partner in Canada is written for that specifically.
Bad Year Plan Checklist
You have one when:
- You can say in one sentence what stays true regardless of the numbers
- You know what you actually did in the last bad year, not what you believe about yourself
- Three or four decisions are off the table, named while nothing was wrong
- The order of what gives first exists, and you chose it
- One thing is named that does not give at all
- You know who gets the call, and that it happens before the decision
- Your standing instruction is written in your own voice
- Your spouse or partner has read it, and their version does not contradict yours
- Reserves, coverage, current documents, a life file, and a held conversation are real
- The whole thing fits on one page, and you know where the page is
Frequently Asked Questions About Planning for a Bad Year
What is a bad year plan?
A short written set of decisions made in advance about how you will respond when something goes wrong financially. It covers what comes off the table, what absorbs the shock first, and who you speak to before deciding. It contains no market predictions.
Is this the same as an investment policy statement?
No. An investment policy statement governs the portfolio. A bad year plan governs your behaviour across all four kinds of bad year, only one of which is a market event.
How long does it take to write?
Roughly a one-hour conversation and a single page. The difficulty is not the work. It is doing it during a stretch when nothing is wrong, which is the only stretch in which it can be done well.
Should there be specific thresholds, like what happens if markets fall 20%?
Not necessarily. Thresholds assume you predicted the right scenario. Simple behavioural rules survive scenarios you did not imagine, and they apply to the three kinds of bad year that have nothing to do with markets.
How often should it be reviewed?
When something meaningful changes, not on a calendar. A retirement, a business sale, a death, a new health reality. Those are the moments it either holds or needs rewriting.
What if my spouse and I disagree?
That is the most valuable thing the exercise produces. Two people in the same household frequently have different fears, different one-way doors, and different ideas about what should give first. Finding that out now is considerably better than finding it out in month three of a bad year.
Does this replace working with an advisor?
No. The plan only functions if someone points at it later. A page you wrote and filed does very little. A page someone else knows about, and raises with you when things get difficult, is a different kind of object.
Ask Someone Else the Question
You cannot prevent a bad year. Nothing does that.
What you can change is what the bad year costs you, and almost all of that cost is decided in a handful of moments when you are least equipped to decide well.
If this was a useful question to be asked, pass it to someone who has not been asked it. The person you would call. The adult child who is going to inherit the responsibility one day. The friend who has been carrying a bad year quietly and has not had anyone to think it through with.
It takes an hour, and the only requirement is that nothing is currently wrong.
Clarity creates calm. Calm creates confidence. Confidence inspires action.
For the full framework, including how to build each part and what a finished page looks like, see our Bad Year Playbook Guide. For the retirement-specific version of this preparation, see the Retirement Checklist for Canada and the Preparing for Retirement Guide.
About Shea Sanche
Shea Sanche, CFP®, is the founder of Insight Planning Wealth Management and has worked as a financial advisor since 1999. He specializes in financial planning, retirement strategy, and decision frameworks for Canadian families and business owners, with a focus on simplifying complex financial decisions and long-term wealth planning.
He is the creator of Insight 360 OS, a decision and life-design system built to help clients navigate financial complexity, uncertainty, and major life transitions.
Insight Planning is a wealth management firm serving clients in Canada. This article is for informational purposes only and is not legal or tax advice.
Common Questions About This Topic
Do I still need a will in Canada if assets are joint?
Yes. Joint ownership can simplify transfers, but it can also create fairness, control, and tax issues. A will plus clean ownership and beneficiary structure protects intent.
What is probate in Canada?
Probate is the legal process that validates a will and allows an executor to distribute assets. Avoiding probate should not create worse tax or family outcomes.
What does an executor do?
An executor administers the estate: collects assets, pays debts and taxes, files returns, and distributes the remainder according to the will. Preparation reduces delays.