Your Finances During COVID-19

The past few weeks have been pretty rough all around the world. The COVID-19 pandemic has taken the health system, the economy and every consumer’s finances by storm.

During the COVID-19 pandemic, several businesses have had to close their doors, reduce their work hours or reduce their workforce. These cuts have resulted in job losses for many consumers who, overnight, find themselves without a job or salary. Consumers are left without a source of revenue, but the bills keep piling up and the due dates get closer and closer. Several options are available to you.

Emergency Budget

An emergency budget is different from emergency savings. Though it is too late to save up for an emergency, it is not too late to make an emergency budget based on your reduced income. Start with the biggest expenses: your rent or mortgage, medical expenses such as drugs, and the usual, reasonable expenses for food. Keep in mind that, because of self-isolation, much of your spending will be reduced or different compared to before the crisis. The expenses that are probably much lower than before include, for example, entertainment, hobbies, daycare, eating out, parking, gas, public transportation passes and personal spending.

When you examine all of your expenses, bills and financial obligations, contact each of your service providers to see how you can reduce what you have to pay without incurring large penalties. Do not be afraid to temporarily reduce your service plans. Saving a little on each bill will have many positive effects in the long term. But remain alert: if you defer too many obligations, you could have a mountain of debts later. The key is to reduce now where you can without postponing your financial problems to a later date. It’s important to get the right information about the steps to take and the expenses that might be hidden in turnaround measures.

Contact Your Creditors to Work Out Agreements

Paying your debts accounts for a large portion of your emergency budget and the main Canadian banks have all announced that they will examine requests for assistance on a case-by-case basis. If you can, contact your creditors before you begin to fall behind or as quickly as possible once you realize you have fallen behind. They will be in the best position to assist you. Deferring mortgage payments, skipping payments, extending loans, modifying terms or even reducing interest rates are all things that creditors can consider. What they can offer largely depends on what you need, your payment history, the risk associated with your file and your credit behaviour in general.

As with all modified arrangements, make sure, above all, that you understand the terms and conditions. Deferring your mortgage or loan payments can result in your creditor adding these skipped payments to the end of your loan term. In the case of a mortgage, this could mean that skipped payments will accumulate interest for the next 25 years if your mortgage is still rather recent. If you don’t have any other options, this could be a good arrangement for you, but it is worth looking at all your options before accepting one that will be more expensive in the long run.

Be Careful With “Easy Credit”

Though it is true that some interest rates are now near historic lows, avoid the temptation to borrow during times like these. Instead of committing to making payments, put the money you would have used to make these payments into a savings account until the situation stabilizes. There are good chances that interest rates will remain low for a long time after the COVID-19 crisis is over to help the economy recover more quickly.

COVID-19 is bigger than any crisis that most countries around the world have seen for a very long time. We have all been affected—individuals, families, communities, small and large businesses and all levels of the health system and the government. Sticking together and helping one another is the only way to overcome this crisis successfully.

With all the uncertainty, addressing your financial problems by filing a consumer proposal or a bankruptcy could mean getting a real fresh start and stop worrying for the month or months to come.

You can always count on our insolvency professionals to support you in your financial decisions and advise you in the months to come. All of us care deeply about your financial health and have flexible plans and solutions.

Ginsberg Gingras, by your side for 40 years.