Why You Need to Review Your Finances Amidst the COVID-19 Pandemic

As Canadians settle into their third week of lockdown, the uncertainty that looms around COVID-19 has everyone worried about their finances. School closures and state of emergency declarations have been extended, which means that people will be out of work longer as businesses continue to be closed. While some Canadians are fortunate to still be working the future is still uncertain, and as the lockdown continues more businesses may be forced to lay off their employees.

“Just because you’re still working now doesn’t mean that job losses can’t happen,” says John Eisner, President of Credit Counselling Services of Atlantic Canada. “We are facing unprecedented times right now and things are changing daily. Everyone should be reviewing their budget right now to see where they can cut back expenses – not just those who have already lost their job.”

Eisner offers some suggestions on what Canadians should be doing right now to manage their finances during this difficult time:

  • Identify the necessities. Shelter and food are the primary needs right now, and your budget should first and foremost cove these two items. If you don’t have enough money to cover these expenses, identify areas where you can cut back to free up some money. This includes foregoing savings and loan repayments in order to keep a roof over your head and food on the table. If after you’ve made cutbacks you still can’t come up with enough money, call your landlord or mortgage provider to see what arrangements can be made.
  • Contact your providers. Identify other bills that you have, such as car insurance, car payments, utilities (e.g. heat, hydro, water), property taxes and telecomms (e.g. cell phone, internet, cable) and visit each of their websites. Most businesses have updated information about how they are helping clients through this time. Contact them and explain your situation to see if there is any flexibility with your payments right now. If you still have income, contact them anyway to understand your options in the event you do lose your job. 
  • Cancel or reduce unnecessary expenses. If you have two cars right now, odds are you aren’t using them both. Call your insurance company and find out how you can reduce your payments by either temporarily cancelling the insurance or removing or reducing liability and collision. This could save you several dollars a month. Figure out what other expenses you can adjust at this time, such as a gym membership, newspaper subscription or meal delivery service. If you can’t cancel completely, find ways to reduce the total cost, for example by removing speciality channels from your cable package.
  • Halt RRSP and TFSA contributions. During uncertain times, it’s important to have money set aside. However, with many banks closing its doors to customers, accessing savings that are in a TFSA can be difficult. Additionally, you will face penalties for withdrawing money from an RRSP before retirement. In the short-term, if you’re still able to save, think about putting your TFSA and RRSP contributions into a savings account instead so that you can easily access it. If money is tight and you’re forced to choose between paying bills and saving, always pay your bills.
  • Reduce loan repayments. If you’re still fortunate enough to be able to make full repayments on your loans, then you should do so. However, if you’re torn between putting food on the table and paying down your debt, food should be your priority. Canadians are in survival mode facing an unprecedented global emergency. This means that if you can only make the minimum payments on your loans for the short term, then it’s okay to do so. You can go back to your full debt repayments when this all dies down.
  • File your taxes. Although the CRA has extended the deadline to file your 2019 taxes, delaying filing may negatively impact your ability to receive the increased benefits currently being offering by the government in light of COVID-19. Additionally, if you don’t file and are due a refund, you may miss out on an important sum of money that could help you through these times.

“Everything that we’ve traditionally known as good money management has gone out the window during this time,” says Eisner. “People need to know that when it comes to survival mode, keeping a roof over your head and food on the table is the most important thing, even if it means reducing debt payments and savings. These short-term solutions will pay off in the long term.”

To learn more about how COVID-19 will affect your finances, and how to find relief, read this. If you need help or guidance with your finances during this time, contact us today for telephone counselling.

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