Healthy Money Management Through Crisis Times
- | April 30, 2020
As we begin our second month of social distancing, many living on low or reduced income are also likely feeling financially confined. During this new normal, it’s important to stay informed and to stay safe. This is also true for money matters. Here’s some information to support you in these unprecedented times.
If you haven’t yet, now would be an ideal time to create a “Lean Times” budget. During a crisis, you need to know how much money is required to meet essential needs. Start by listing all household expenses and their costs. Then, number your expenses in order of priority starting with the must-pay costs. Priorities should include shelter, utilities, groceries, transportation, health care, debt repayment, and if possible, savings. You can list non-essential expenses but keep in mind they should be at the bottom of your list. What’s the difference between essential and non-essential expenses you ask? Essentials are mandatory for survival. (Yes, coffee is on mine – for my own and my household’s sake!)
Next, list and add up all sources of income. This may include salary/wages, pensions, CPP, OAS, GIS, employment insurance, CERB, CEBA, social assistance, student loans, bursaries, Canada Child Benefit, GST and any other confirmed sources. Write down your income total on the top of a sheet. Then starting with the number one item on your essential expenses list (ex. rent), subtract it’s amount from your income total. Continue to subtract each essential expense in order of priority. When you run out of money, that’s where you stop and that’s your “Lean Times” budget. It’s simply Total Income – Essential Expenses = Balance. The balance remaining will be either positive (meeting essentials), negative (not meeting essentials), or zero (meeting essentials exactly).
If you didn’t meet all essential needs, the following tips can help to increase income and decrease expenses. Firstly, if you haven’t filed your tax return yet and expect a refund, file your 2019 tax return. There are free online tax programs and some community organizations that still provide this service with safety considerations. Apply for the applicable federal, provincial, student, self-employment, business, or community benefit program for which you are eligible. Ask your home community if they have support programs available. If you have emergency savings or investments not terribly affected by the market decline, use some but only take what is needed monthly. If you have a pension savings plan, do your very best to leave it alone. If no other option, then talk to your financial advisor how withdrawing from it would affect your circumstances.
If you’re struggling to pay bills, look at your non-essential costs such as subscriptions, cable and cell phone add-ons, insurance package policies, and anything that is not vital to your financial survival. Communicate with creditors and service providers immediately. Tell them you’re struggling due to Covid-19 circumstances. Many offer plans to lower interest rates, halt delinquent account collections, reduce and defer payments. Note that deferment does not mean writing off balances. It means postponing payments. You are still required to pay after things settle down. Interest is also still accruing so be aware of what they’re offering and write notes of your discussions for reference.
If you are fortunate to have money left over after meeting priority needs, don’t spend it! Pay your minimums required so things don’t pile up. Open a free e-savings account to start an emergency fund today for tomorrow’s surprises. And help others as allowable. This writer has weathered many storms and their accompanying tough money lessons. One of the most valuable was dealing with priority needs first. This life lesson holds true for all income levels, especially during such equalizing times of crisis. I hope that you stay safe and act in your own best interests, including from a financial perspective.
For more financial wellness knowledge sharing, contact this Money Scout at www.moneyscout.ca and be sure to like us on Facebook at Scout Financial Solutions or follow us on Twitter @MoneyScout4U.