As we navigate the ongoing pandemic, health and safety are major concerns. That said, financial worries are hitting many Torontonians just as hard. Most of us know someone who has lost their job or had their hours cut due to COVID-19. As a result, we’re all putting more thought into our spending—and what we can do to protect ourselves.
Fortunately, there are a few steps you can take to reduce the chances that you’ll face financial hardship. Here are five budgeting tips to use during the COVID-19 pandemic…
1) Know your household income
First things first: if your financial situation has changed, it’s time to reassess your income. Have you or a member of your household lost work due to COVID-19? If so, you’ll have to revisit your budget—and revise it accordingly. That means reducing your spending by an amount that reflects the income you’ve lost.
Of course, it’s not always that simple. If you’ve been racking up some debt in recent months, you’ll likely need to cut back your expenses even more. In that case, now might be the time to consider tapping into any savings you have stashed away.
Either way, I suggest looking into the Canadian Emergency Response Benefit (CERB). Through the federal government, eligible workers who have lost income due to COVID-19 can receive up to $500 a week for up to 16 weeks.
2) Reduce your expenses
Trimming the fat in your budget may not be enough to ensure your financial security, but it can certainly help. The first step is tallying up all of your regular expenses. Split the list into two: those costs that are essential, and those that aren’t.
In most cases, this distinction will be straightforward. Your condo fees are a necessary expense, while your biweekly UberEats orders aren’t. That said, you may find that some items could fall into either category. For example, if you have two cars for your household, now might be a good time to keep one parked in the garage and save on the insurance.
If your baseline monthly income has changed, be sure you use the new number when you’re budgeting.
3) Pay down your debt
It can be hard to get out of credit card debt, even in the best of circumstances. Unfortunately, when your finances have taken a hit, tackling it can feel next to impossible.
While it may be tempting to put paying off your credit cards on the back burner, that could be a big mistake. If you’re in a position to continue making payments toward your high-interest debt, do so—even if it means cutting expenses elsewhere. In the event that you do experience income loss, you’ll be glad that you continued chipping away.
As a rule, banks are trying to accommodate their clients as much as possible. Some lending institutions are even reducing credit card interest for borrowers who are experiencing financial hardship. In other words: if you’re in a challenging situation, talking to your bank can’t hurt.
4) Create an emergency fund
During this uncertain time, planning for worst-case scenarios is critical. That means contributing to an emergency fund in case your household income takes a hit.
If you’re able to save, put as much aside as you can—and understand your options when you’re looking for a place to park your money. A tax-free saving account (TSFA) is a great choice, since you won’t be taxed on the funds that go into it.
Most experts suggest that emergency funds should contain enough money to cover three to six months of expenses. Of course, saving that much in a short period isn’t feasible for everyone, but do what you can.
5) Ask an advisor about your investments
If you’re experiencing anxiety related to the current market and your investments, you’re not alone. Short-term volatility is bound to make you at least a little bit wary. Of course, that doesn’t mean you should react before you’ve had a chance to think the situation through.
When it comes to money, panic can lead to some pretty poor decisions. Fortunately, talking to your financial advisor can help you keep a level head. While you certainly don’t have to follow their recommendations, hearing their expert opinion will allow you to make a more informed decision.
There’s no doubt that many homeowners are worried about covering their expenses during the COVID-19 pandemic. The good news is, taking the right steps can reduce the likelihood that you’ll have to deal with financial hardship. The time to take action is now!
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