Making smart financial choices in times of crisis

Wednesday, April 8, 2020

Opinion editorial
By: Tracy Hilpert, CPA, Adjunct Lecturer, School of Accounting and Finance

Worrying about finances can impact your physical and mental well-being and create strain within relationships. In a summary of research communicated by the Financial Consumer Agency of Canada:

  • 48% of Canadians say they’ve lost sleep because of financial worries 
  • 44% say it would be difficult to meet their financial obligations if their pay is late

Consider what Canadians are facing right now.  It’s not a matter of a late pay-cheque, but rather, no pay-cheque at all. When stress and emotions run high it can lead to making poor financial decisions.

Before turning to pay day loans and high interest credit cards, consider other sources of available cash flow: 

  1. Income support replaces lost income by providing you with cash in the short term. 

    Examples include:
  • Employment Insurance – If eligible, the waiting period is waived and you can start collecting EI as soon as possible. 
  • Canada Emergency Response Benefit – If you don’t have benefits and aren’t eligible for EI, you may be eligible for support up to $2,000 per month for 4 months.
  • GST Tax Credit and Canada Child Benefit  – Maximum amounts have increased with special payments scheduled for May. Eligibility is based on income and established by filing a tax return.
  • Provincial aid programs – Many provinces have additional aid available. For example, Ontario will be offering child care support due to school closures. Visit Provincial websites to learn more.

Learn more about federal support programs.

  1. Expense management means finding ways to reduce spending while your income level is low.
  • Needs vs. Wants – Review your spending to identify needs and wants. A need is something you must have to maintain your health, support your family, keep safe and support your income. Needs include food, shelter, utilities, wifi to work from home, or transportation for essential workers.  A want is something you enjoy and adds value to your life, but it isn’t something you need to get by. While food is a need, expensive takeout is a want. Decide what you can forgo temporarily to reduce spending in the short term. 
  • Contact service providers – If you’re concerned about paying your monthly expenses, call your service provider about temporary relief measures. If available, ask questions to understand what this relief means and what it will cost. Most temporary relief measures are a form of deferral, meaning you don’t pay now, but at some point in the future. Understand when and what will be owing later so you can plan accordingly. 
  • Income tax – Deadline for filing an individual’s tax return in Canada is now June 1. If you owe tax, your payment isn’t due until September 1st.  Take advantage of this later payment deadline to put more money in your pocket today. When your income returns to earlier levels by September, you can make your payment. If you expect to receive a refund, refundable tax credits or income support, file now.   Filing early means less delay in receiving those supports.
  1. Negotiate with creditors, the organizations that have lent you money. The timing of your repayments may be negotiable. 
  • Mortgage payments – Many banks will work with customers to manage mortgage repayments during this crisis. Common relief includes skipping or deferring payments. Talk to your bank to understand the implications, including what it will cost and when the missed payments will need to be repaid. 
  • Other loan payments (eg. car loans or leases) – Contact your financing or leasing company to ask about deferred payments or lease extensions during this crisis. 

Your credit rating is impacted by your debt and bill payment history. Missing a payment may be necessary under the circumstances so be proactive and call the creditor in advance to notify them and discuss your options. Don’t let your payment slip and risk impacting your credit rating and your future ability to borrow funds when needed.

If you must borrow money, there are lower cost options available if you qualify. A line of credit may offer lower interest rates than traditional credit cards. Speak to a bank, financial advisor or credit counsellor about what’s right for you.

You may be isolating yourself from others to flatten the curve, but you are not alone.  If you’re worried about paying your bills today, tomorrow or in the future, ask for help.  Explore your options by using trusted and reliable sources only.  Help is available but be wary of financial scams.  If you’re unsure or uncomfortable, stop!  Do not share your personal information.  Take the time to ask more questions, go to the source, and check the facts before you act.  The Government of Canada’s website is a great place to start. 

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