Don’t Panic – A Financial Guide to Making it Through The Pandemic
It’s one thing when a few aspects of your financial security go pear-shaped, but when the whole thing, from the economy to the markets, through to your job-security goes out the window, it’s hard not to panic.
But the first and most important part of good, financial advice is: Don’t panic.
Everything will be ok
Before you make any rash financial decisions, take a moment to meditate, hug a loved one, or take a few big, deep breaths.
Everything is going to be ok. Let’s start with good, sound financial decisions, then move on to the aid you can leverage to get through this difficult time.
Keep calm and carry on – financially
Stay steady with investments
The markets have taken a nosedive, which has a lot of people considering pulling the ejection cord. However, jumping out now is the worst thing you could do. Every time the markets have crashed, they have recovered. The smartest thing to do right now is to wait it out. In fact, if you have some savings you’ve been looking to invest, now may be the best time to get in – while prices are low. Then when the markets recover, you’ll see a nice return on your investment.
Root around for opportunities to save
Chances are before COVID-19, you didn’t worry about going out for dinner, shopping for new clothes, or that ever-ballooning phone bill. Now that money is tighter, it’s time to look at cutting back on things that may not add much to your life (that extra data is starting to look useless when you’re always in wifi). Looking at pulling back on take-out and getting those out of control cable and phone bills down (or subscription-based apps you don’t really use), and you can eke out a lot of savings to keep you comfortable until things return to normal. Some positive news for those who may have lost their job or are in self-isolation is there are not as many places to go right now to spend your money.
Be vigilant and watch out for scams
Unfortunately, it’s often when people are feeling afraid and vulnerable when scammers come out of the woodwork. So as the old saying goes, ‘if it seems too good to be true, then it probably is.’ Make that your mantra when you spot these ‘amazing’ offers in your inbox, on social media, or wherever they may come from. Be sure not to click on links from unknown sources (and especially don’t put any personal information on any forms you have directly accessed on a webpage you don’t know if you can trust) and stick to official channels when accessing aid. Trust your gut: if in doubt – avoid it.
Look for Ways to Access Cash
By filing your taxes now, or heading over to your account on the CRA.ca website you can look for possible uncashed cheques, you can find some extra cash that could provide you with a bit more of a cushion to ease the pressure.
Aid for individuals
The government has come out with a sweeping aid bill to help individuals who have been affected by this pandemic. It can be confusing to try and understand what is available to you. So, let’s take a look at what’s available and what will work for you.
The federal government is currently requesting that banks work with homeowners to give those who need it deferrals through the crisis. As a homeowner, that can really help and is there if absolutely needed, no question. But, it’s best not to rely on a mortgage deferral if possible. The interest from those deferred payments is added back to the outstanding balance so that clients pay interest on interest, which increases the total cost of borrowing.
Canada Emergency Response Benefits (CERB)
The CERB is available for a long list of individuals who may not have access to EI benefits, including the self-employed or those caring for a family member with COVID-19. The CERB is a $2000/month benefits package that lasts up to four months but must be applied for every 4 weeks. It's important to keep in mind this is a taxable benefit. So, make sure to put some of this money aside so you don't get surprised come tax time.
The CERB is aimed at:
Anyone who is forced to stop working but doesn’t have access to other aid
Those who have stopped working due to self-quarantine or those who are currently at home caring for a quarantined person
Parents who have stopped working to stay at home to take care for their children
Those who are still employed but are asked not to come in because of a lack of work
Wage-earners and the self-employed, including contract workers who are not otherwise eligible for EI
Ottawa has opened up EI benefits as more and more people have been laid off due to the pandemic. Currently, the government recommends that anyone who has lost their job due to COVID-19 apply for EI benefits, whether you are typically eligible for EI or not. These benefits are:
55% of your average weekly earnings up to $573/week
Last for up to 45 weeks
Available to apply for until October 3, 2020
EI Sickness Benefits
Similar to regular EI benefits, EI sickness benefits are now available for a broader range of people. If you are sick, quarantined, or in self-isolation you should apply for EI sickness benefits whether you are typically eligible or not. These benefits:
Are immediate, as the government has waived the mandatory 1-week waiting period
Do not require a note from a doctor
Consist of 55% of your average weekly earnings up to $573/week
Benefits you won’t have to apply for
The Canadian government is also offering a variety of benefits that do not require an application. These include:
A bump in the Canada Child Benefit of an extra $300/child
A one-time increase of the GST rebate of $400 per individuals or $600 per couple for low and modest-income families
Relief For Students and Seniors
The government is suspending the repayment of federal student loans until September 2020
The minimum withdrawal from Registered Retirement Income Funds can be decreased by 25% for 2020 (this optional).
Once we’re through this, many people will have put a dent in their savings. So, it’s important to focus on building that emergency fund back up once the money starts flowing a little more freely again. As a general rule, we always recommend putting aside at least 3 months’ worth of spending for emergencies like this one, but 6 months is optimal.
As we continue to deal with the pandemic and its fall out, finances may get a little tight. However, if we stay calm and see it through, history shows us that the economy will recover. So whatever your choices and plans are right now, make sure to include the inevitable return to better days.*Everything in this blog post is current to April 6, 2020. Check Canada.ca for more up-to-date information.