Canadians are in uncharted territory when it comes to handling their personal finances during the COVID-19 pandemic. Right now, over one million Canadians find themselves out of work and unable to earn a living during this time, and many are relying on temporary aid from the government to get by.
Here are five tips to help you manage your financial situation during these unprecedented times:
Create a Financial Plan
For many Canadians, their income has dropped but so have their expenses. Perhaps you’re not paying for daycare, or you’re working from home and no longer use as much gas. The time is now to relook at your budget to see where things stand.
For those lucky enough to not have any change to their income, focus on paying debt and building savings. Even if you are continuing to earn the same income, chances are that your expenses have gone down. For example, your expenses for gas, child care and eating out have likely gone down significantly.
If your expenses exceed your income, now’s the time to scale back your spending and focus on essentials only.
If you haven’t already, make a financial plan or budget. There are many on-line tools and apps that can help you to create this. The best budgeting apps according to Nerdwallet are:
- Mint (saving more and spending less)
- YNAB and EveryDollar (for zero based budgeting)
- PocketGuard (simplified budgeting)
- Clarity Money (all-inclusive budgeting)
- Goodbudget (shared envelope budgeting)
- Personal Capital (tracking wealth and spending)
Review your debt load
If you are carrying debts right now, be aware that any deferrals of payments you arrange through your bank or credit card company will cost you in the long run, as interest will continue to be charged and compounded.
Write down a list of each debt you have, the balance, the interest rate and the minimum monthly payment. Organize the debts in priority, either by the debts with a higher interest rate or by balance, i.e. smallest to largest.
This will give you the information you need to make decisions on how you are going to deal with your debt going forward. Can your budget handle the payments? Do you qualify for deferrals from the bank or credit card companies?
Know what government programs are available
It is important to investigate the Provincial and Federal Government initiatives that are available for you especially when you want to manage personal finances during the COVID-19.
The Federal Economic Response plan can be found here: https://www.canada.ca/en/department-finance/economic-response-plan.html
British Columbia’s Financial Supports can be found here: https://www2.gov.bc.ca/gov/content/employment-business/covid-19-financial-supports
Maximize the benefits you are receiving but be aware that some of these may be clawed back at income tax time.
Use credit wisely
During this time it is very tempting to use credit to balance your budget. Use it wisely during this time as you need to fully understand the consequences of overusing credit, and need to have a plan in place to pay it back.
D. Thode & Associates Inc. and its Licensed Insolvency Trustees are available by telephone or videoconference to discuss the options available to you in dealing with your debt load. Don’t wait, get the information you need now. The consultation appointment is free and we can assist you in making these important decisions..