Thousands of mortgages come up for renewal every year in Canada. By March 2025, 31%…
At the start of 2019, many Canadians were living paycheque to paycheque. In fact, nearly half of us would have been unable to pay off a $200 or less emergency bill. Mid-way through 2020, we find ourselves facing a pandemic and inevitable recession. Many of us are experiencing first-hand just how alarming the above statistic is.
Now more than ever we need to get a handle on managing our finances during the COVID-19 crisis. This is particularly true if:
- Your job has been terminated.
- You’re concerned your employer will need to make cutbacks in the foreseeable future.
- Your business is losing revenue.
- You have always struggled to make ends meet, but find the current situation unbearable.
- You do not have an emergency fund.
- You are depleting your emergency funds to survive the pandemic.
We are all confronted with the prospect of unemployment or at the very least the severe curtailment of our income as a result of the novel coronavirus. Like the virus itself, there are many unknowns surrounding the looming recession – like how long it will last and how deep it will go.
You need to know realistically how long you can survive on what you have in your hands right now, and figure out ways to make that stretch. If you don’t have enough to get you through, you need to know where you can go for help.
Know your numbers.
Your first step is to figure out what you have saved and what’s coming in. Track your spending to understand where your money has gone and where it’s going.
Next, make a realistic budget.
Divide your expenses into needs, wants, and the unnecessaries. Cut back on all non-essential expenses immediately, and get started making a budget you can keep. If you have a budget in place already, see where you can cut back.
And fight the temptation to engage in retail therapy or boredom purchasing. Even if your income has remained steady at the front-end of the pandemic, we don’t know how long the pandemic will last. Think of ways to make the money you currently have sustain you as long as it possibly can.
Prioritize your bills.
If you are still making income, continue to pay your bills and debts as they come due, or at least the minimums on high-interest debts first. This way you avoid penalties and late fees.
If you are unemployed or you’re concerned you may very soon be let go, you need to prioritize your payments. Make sure food, medication, and utilities (like hydro, gas, internet, and cell phone bills) are paid first.
Next, you can address your rent or mortgage. If you have income and can afford to pay your rent, you should. A deferral doesn’t make sense if you have the money since you’ll eventually end up needing to pay anyway.
With respect to your mortgage, some lenders may reach out to you to offer a suspension of your monthly loan payment during the crisis. If the lender expects you to repay the months you skip quickly within a few months – a balloon payment – then you might as well pay now.
If, however, the lender will tack the months you skip to the back end of your loan – and you do not have an emergency fund in place yet – you may wish to take your lender up on the offer. So for example, if your loan was to be paid off in May 2022 and you are skipping 3 months now, the 3 months will be added to the end of your loan and your final payment will be three months later, August 2022. While you would likely be paying more interest on your mortgage overall, you would be able to start or add to your emergency fund.
If you can’t afford your rent or mortgage, pay what you can and be sure to talk with your landlord or lender about deferrals or partial payments. And if you’re concerned you’ll get evicted for non-payment of rent, you should know that the Government of Ontario has temporarily suspended evictions. Though you may still receive a notice of late payment and your landlord may file to evict you, for the immediate future, you can’t be kicked out.
Communicate with your creditors.
Everyone is being affected by the pandemic, and many lenders are willing to work with you. You may be able to defer your mortgage payments or get rate reductions on your credit card to help you out, at least in the short-term.
Avoid high-interest loans.
If you’re unemployed, you will probably need to rely on your credit card for food and living expenses. This is especially true if you have no emergency fund to fall back on. Try to avoid high-interest loans, like payday loans, since they only trap you in a vicious debt cycle that will be near impossible to get yourself out of. If you’re considering taking out a payday loan, contact a Licensed Insolvency Trustee instead.
Know where to go and what to do if you’ve lost your job.
A full list of the Canadian Government’s benefits can be found here. There are special criteria for affected workers that are self-employed, those that earn $1,000 or less, and those with seasonal jobs cancelled as a result of the novel coronavirus. And if you are quarantined due to COVID-19, you can apply for EI sickness benefits immediately. The Canadian Government has waived the one-week waiting period.
We suggest you try to get some income wherever you can, including from part-time jobs that aren’t offering even close to what you were making. The longer you can stretch whatever income is coming in, the longer the lifeline you give yourself, until you can reapply when things open up again.
Here’s when you should get help from a Licensed Insolvency Trustee…
Licensed Insolvency Trustees (LITs) are experts in solving debt challenges. They are federally licensed and regulated, required to abide by strict ethical regulations, and able to assist debtors with a range of debt-relief options, from budgeting all the way to bankruptcy.
The first consultation is free, and it’s at that consultation that you will learn about all the debt relief options available to you.
Get help if you answer yes to any of the below questions:
- Are you considering payday loans to make it through the pandemic?
- Are you receiving collection calls and don’t want the stress of it on top of everything else?
- Were you trying to deal with your debts before the pandemic, but your repayment plans are being pushed back because of it?
- Are you considering bankruptcy or a Consumer Proposal because of the loss of household income?
- Do you want to get ahead of your mounting debt now that you’re still working?
Contact a Licensed Insolvency Trustee Today
If you need help getting your finances in order, it’s imperative you reach out as soon as possible. Our offices are open and responding to queries via telecommute at this time. We look forward to hearing from you, and helping you onto the path of easing your financial stresses during an already stressful time.