Managing your personal finances during a crisis can be challenging. Even if self-isolation allows you to limit your daily expenses, you still have fixed expenses to pay off. For the unlucky ones, the situation brought about by COVID-19 can lead to temporary unemployment and a loss of income. Take a look at some practical advice for managing a reduced income while still taking care of fixed expenses.
Start by making a list of all your fixed expenses. This refers to everything you must pay off every month, like your rent or mortgage, your electricity and phone bills, your insurance, your loan payments, or the minimum payments on your credit cards. Before you find yourself late on your payments, you could quickly contact your providers to try and reach an agreement. Good news: Hydro-Québec doesn’t charge any penalty fees on late payments. Plus, some municipalities have postponed the deadline for paying municipal taxes to April 2020.
Then, compare the sum of your payments with the money you have coming in. Before you find yourself in the red and it starts affecting your credit rating, contact the Bank. We have some special measures set up to help you.
Depending on your profile and financial situation, the Bank has some support measures set up that allow you to defer your payments for personal and mortgage loans.
You also have expenses that are variable but necessary, like groceries, maintenance and repairs for your home or your car, personal care, etc. If possible, take stock of what can be reduced or deferred.
You need to adapt your habits as much as possible by finding the least expensive option. The key thing is to review your budget! Make a calendar of upcoming payments to get a clear idea of how much money you’ll have left over. The Financial Consumer Agency of Canada has made available a budget calculator to assess your expense to income ratio and determine whether you have a surplus or a deficit.
When facing unexpected situations like a loss of employment or sick leave, a reduced income is among the first things that will affect your life. It’s perfectly normal to feel stressed out when you’re in a tough financial situation, but there are alternatives to help you change your lifestyle and develop the right instincts.
First, it may be best to use your debit card rather than your credit card if you’re not sure whether you’ll be able to pay in the short term.
If you’re already in debt and have trouble making your payments, don’t take the risk of contracting an additional loan. A loan must be your last resort. The idea is to reduce your expenses instead of taking on new debts. Pay particular attention to personal loan companies who offer easy sign-up processes that don’t require a credit report. Instead, contact your financial institution to understand the financial options available to you. Your advisor will be able to help you and suggest solutions that are more suitable to your situation.
Finally, feel free to get support from the government or your employer with regards to employment insurance and vacation benefits. Depending on your particular situation, employment assistance is also available.
The Quebec government has currently set up a Temporary Aid for Workers program to support people who have contracted the virus, who don’t have private insurance, who aren’t covered by government programs, or who aren’t being compensated by their employer.
This is in addition to the usual support you can expect if you already collect welfare benefits, like the Action program.
If you’re a seasonal worker, the government’s Assistance for Seasonal Workers program can be a good resource for you. If you have a disability, the Employment Assistance for Persons with Disabilities program could also help you.
The official website for the Government of Canada also includes a COVID-19 economic response plan.
Finally, if you have to dip into your savings (RRSP, TFSA, savings account, etc.), consider the fiscal impact on withdrawals first.
Withdrawing money from your RRSP should be a last resort, because it can trigger major tax consequences. First, you will have to pay a withholding tax when you withdraw; second, the amount you withdraw will also be taxable.
As for your TFSA, there’s no fiscal consequence if you make a withdrawal. However, you’ll have to wait a certain amount of time (until the following year or later that year if your TFSA contribution room allows it) before being able to replace what you withdrew.
As mentioned by Frédéric Plamondon Simard CPA, CGA, financial planner at National Bank, it’s always better to withdraw money from your savings account as a first recourse, then from your RRSP or TFSA if you don’t have any other savings.
Due to this exceptional situation, the Bank has set up several support measures to help our clients.
You may benefit from deferred payments or prolonged amortization periods for your mortgage. If you decide to defer your mortgage payment:
Finally, special loans are available to cover living expenses.
Contact your advisor for more information.
The Bank will offer flexible and personalized solutions for every business that is directly impacted by the crisis. Contact your account manager to talk about the solutions that are available to you.
Given the current circumstances, additional support is welcome to ease your financial burden and allow you to focus on what really matters: your children, your health, and that of your loved ones. Whether you have worries or difficulties related to your mortgage, your personal loans or your money, we can help you.
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