by Tim St Vincent

Time for my monthly article. Sometimes I sit and ponder for a couple of days about what topic I want to write about. There is no shortage of options. This month there was no pondering required; there is only one topic out there, COVID-19.

As this is an article about money, I will stick with the financial impacts and implications of COVID-19 and stay away from other aspects of it and leave it to those better informed than I.

Whether or not you are among those still currently working the question is the same: “What does this mean to my finances?” Well, I won’t get into the financial planning aspect of that (ask a current CFP for some advise), but I will throw some clichés your way that I find to be very true:

1. It is only a loss if you sell (AKA it’s a loss only on paper. You make it real only if you sell.)
2. You only get hurt on a roller coaster if you jump off halfway through the ride.
3. Everything that goes down must come up (reverse gravity!). The real question is: do you have the time to wait for the upside?

With that taken care of. let’s look at the more day-to-day aspects of your finances. That is the world where I currently dwell. What to do?

Well I suggest you start with a financial triage. Look at:

1. How much money is coming in, where is it coming from, and can I increase it?
2. How much money is going out, where is it going, can I reduce and/eliminate any?

In other words, do a budget.

Do a budget

Fifty per cent of the country has no budget. Before COVID-19 hit, 50 per cent of the country lived cheque to cheque. I don’t see that as a coincidence. Some people don’t like the word budget. It sounds scary and negative. People worry about losing control. I say without a budget, you have no control! Your money is in control because without a budget you go to your money and ask, “Can I afford this?” You ask your money for permission. With a budget you reverse this process and instead of asking permission, you tell your money what it is going to do for you. If you don’t like the word budget, don’t call it a budget. I don’t have a budget. I have a spending plan. Doesn’t that sound cool?

Think about it. That is what a budget really is. It is a spending plan. It helps you figure out how to spend your money now, and how to save your money now so that you can spend it in the future. I have a spending plan!

If you want a good budget (spending plan) to help you, visit:

nomoredebts.org/budgeting/budgeting-tips#budget-calculator

This will take you to the Credit Counselling Society’s tools page. Part way down you can download our budget excel file. It is very good. To have a budget you must track expenses. Otherwise you don’t have a budget, all you have is a wish list. Go to our downloadable daily/weekly expense tracker at:

nomoredebts.org/resources/debt-money-management-calculators/monthly-expense-tracker

Tracking your expenses will help you identify where you can eliminate and where you can reduce.

This is step one. If it comes down to not enough money, who do I pay, focus on necessities first – food, shelter, clothing, health. Do not hoard. There is plenty for everyone. Supply chains are intact. Warehouses are full. As we are buying more than normal (please don’t hoard) sometimes the shelves do not appear full; it is just taking longer to restock the shelves.

CERB

The best way to help offset a loss income is to see if you are eligible for the C.E.R.B. The Canadian Emergency Response Benefit that pays $2000 a month. To apply, visit

https://www.canada.ca/en/revenue-agency/services/benefits/apply-for-cerb-with-cra.html#start

You can apply either online or call 1-800-959-2019 or 1-800-959-2041. Either way the process takes only a few minutes. To manage the volume, Canada Revenue Agency has asked that you contact them only on certain days:

• Mondays for those born in the months of January, February and March
• Tuesdays for those born in the months of April, May and June
• Wednesdays for those born in the months of July, August and September
• Thursdays for those born in the months of October, November and December
• Friday, Saturday and Sunday: any birth month

If money is tight, do your best to make minimum payments – more if you can, but at lest minimum payments. By making minimum payments you will be working on your debt just a little, while at the same time, all other things being equal, improving your credit score. The cost of borrowing will be higher because you are only making minimum payments, but overall, you will still be doing well.

If you cannot manage minimum payments on everything and you need to ask for help, that’s okay! Many people needed help before this started, and many more need help now. Talk to your lender, your bank, your credit card company, your utility and cell phone provider. They are all there and ready to help – but be sure you are aware of the cost of this help.

Payment deferrals

Some lenders are offering to defer payments. Be aware a deferral is not a payment holiday. It just means that they will give you more time to make a payment, but they still expect a payment. They also (for the most part) also expect the interest portion of the payment. When they defer a payment, they will (again, for the most part) take the missed interest portion of the payment and add it into the original debt amount owed. Then they will charge you interest on the interest and this will continue until the debt is paid in full. The lenders will profit from you deferring a payment. Now, if you need to do this and you understand how it works, great. It is only bad if you make this decision and don’t understand how it works. This deferment can be done with most any debt, but let’s look at an example of the largest debt most of us have, and one of the most common deferral requests: your mortgage.

Let’s look at a mortgage with a $2500 monthly payment, interest set at 3 per cent and a 20-year amortization (how long it takes to pay off the mortgage). If in this case the person were to defer their payments for six months (the most you can currently request) the bank will increase profits by adding about $11,508 to the cost of the mortgage (according to Bryan Borzykowski, MacLean’s Magazine, March 31 2020). That would be an awful surprise to get if you weren’t ready for it!

One good thing may come from all of this. When things get better – and they will get better – having gone through the emotional and financial storm caused by COVID-19 may cause us to re-examine how we use credit and debt and inspire us to prepare better. Everyone should strive to have an emergency fund that has enough money in it to cover three months worth of expenses.

If you are having troubles during these times, feel free to reach out to us. The Credit Counselling Society is a non-profit organization specializing in helping people in times like this. We do free budget reviews and preparation, credit reviews, workshops and webinars, and we will even work with your creditors for you. We do not loan money. We aren’t trying to sell a product. Our mission statement is “We help. We educate. We give hope.” If you need assistance you can contact us at 1-888-527-8999 or you can go to our website at www.nomoredebts.org

If you need emotional support don’t be afraid to reach out, there are many excellent resources available to you.

Things are constantly changing with COVID-19, including all the various supports that are offered. To help you stay in touch with these resources you can visit nomoredebts.org/coronavirus.

This will take you to our resource page, which is updated constantly. Our page is also cross linked to other resource sites such as the Canadian Anti-Fraud Centre. Yes, people are running scams based on COVID-19!

For additional resources you can also visit

canada.ca/en/services/benefits/ei/cerb-application/questions.html

This link will take you to the Government of Canada’s FAQ site with answers to common C.E.R.B. questions. I find the site very useful and have gone to it many times. Finally, if you are self-employed, run a business, or you are an entrepreneur, the BDC (Business Development Bank of Canada) has a special page for you. You can access their information at:

bdc.ca/en/pages/special-support.aspx?special-initiative=covid19

Finally, remember two key things. We are all in this together, and things will get better.

Tim St Vincent is a retired CFP and is a Certified Educator in Personal Finance with the Credit Counselling Society, a Non-Profit organization. If you wish to contact Tim for a free workshop or webinar, have a question or would like to submit an article idea please contact Tim at 1-888-527-8999 ext 1330. You can also contact the Credit Counselling Society for further information or assistance at 1-888-527-8999 or visit www.nomoredebts.org or www.mymoneycoach.ca

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