In a matter of weeks, COVID-19 has changed the way we live. For many, this means staying at home to avoid contracting or spreading the virus. And because our budgets are essentially a reflection of how we live and what we do to maintain our lifestyles, many of us will need to modify our budgets accordingly in light of COVID-19. Here's how.
How to Adjust Your budget During the Coronavirus Crisis
While self-isolating, some of us are lucky enough to continue working at home, logging on through the internet and conducting meetings through video chats. However, many Canadians, due to the nature of their job, have been laid off temporarily or even permanently, and still others watch nervously as their once-robust nest egg investments take a beating.
Both of these scenarios can put a tremendous strain on our physical, mental, and financial well-being. That’s why it’s extremely important for everyone, especially those who live from paycheque-to-paycheque, to take a long, hard look at their finances and create a realistic budget. In doing so, you’ll be able to relieve some of your worries and put yourself in a better position to weather this storm.
Step 1: Eliminate Unnecessary Expenses
If money is tight, now is the time to make some drastic cuts to the items you don’t need. One way to do this is to make a list of everything you spend money on, and highlight the items that are needed; everything else must go, at least until the crisis comes to an end. (If you want help identifying your expenses, download our free Budget Planner + Expense Tracker. More on this tool further down.)
What could this mean? Perhaps cancelling some subscriptions or memberships; digging into the pantry instead of getting take-out or delivery; cutting back on or quitting smoking and drinking; switching from pricey coffees and sodas to water; or stopping any frivolous online shopping. (Who needs clothes when you have nowhere to go and can’t leave the house?)
Remember, this is only temporary. But after going without these items for a while, you may decide you can eliminate them for good, which sets you up for more financial wins in the future when things get back to normal.
Step 2: Prioritize Necessary Expenses
Now that you’ve eliminated unnecessary expenses, it’s time to prioritize the necessary ones. Food and shelter are, of course, the most important for survival. If you’re concerned about your mortgage or rent payments, the first thing to do is contact your lender or landlord to discuss payment options.
Canada’s major banks (BMO, CIBC, TD, RBC, Scotiabank) and other lenders are offering options for homeowners to defer mortgage payments for up to six months on a case-by-case basis. No order has been made yet to freeze rent payments, although some provinces have plans to help renters.
When it comes to food, you’ll want to stick to the essentials. There are a few items you may want to buy extra when you do go shopping to help minimize having to leave the house in the future. These items include pet food, dried pasta, sauce, canned soups and veggies, feminine hygiene products, and yes, the dreaded toilet paper and bathroom tissue.
Just don’t go crazy stockpiling. All you really need is a couple of extra cans of soups, packages of dry pasta, etc. next time you go shopping, and if toilet paper is on the list, just get a bigger package than you normally would—not four.
Step 3: Prioritize Other Debts
Once you’ve made a food and shelter plan, it’s time to look at your other bills. You should start by making some phone calls to your creditors; after all, creditors aren’t going to suddenly stop billing you or stop accepting payments without notification of your hardship first. When you do call, you’ll likely find that many lenders (whether it’s a credit card, auto loan, or student loan) and utility companies are offering flexible payments or deferred payments (some without interest accrual).
Once some successful arrangements have been made, then focus on making payments, if you can, to any creditor who may have refused to be flexible. By making at least the minimum payment, you can avoid racking up interest and late fees. This will also help preserve your credit score, which you’ll probably want to be in good shape when we come out on the other side of this crisis.
Step 4: Use Our Budget Planner + Expense Tracker
Often, people say they simply don’t have time to create a budget or track their expenses. But if you’re strapped for cash and stuck at home with little to do, now is the perfect time to get started.
Credit Canada makes it even easier by providing a free, downloadable Budget Planner plus Expense Tracker. The best part is, after entering some basic financial information, the tool does most of the work for you, giving you a clear picture of how much you’re spending and where it’s going so you can determine where you can make cuts.
Step 5: Get Free Expert Help - Credit Canada is Here for You!
None of us have experienced an event like this in our lifetime, and many Canadians are trying to navigate these uncharted waters without a paddle. Credit Canada is offering our support through our COVID-19 Financial Resource Centre, where we’ve pulled together valuable information and tools.
In addition, we have a series of free Take Action webinars about managing your money during the coronavirus pandemic. You can view these webinars on-demand by visiting the Resource Centre. And, as always, our certified Credit Counsellors are available for phone consultations if you need to talk to someone one-on-one about your debt and finances. Our “Financial First Responders” are standing by, give us a call at 1.800.267.2272.