#FinancialFridays: Financial Lessons through COVID-19

by: Caroline Araujo Abbotts, Financial Literacy Program Coordinator, United Way of Bruce Grey

It is a time of heightened concern and fear. I am nervous about walking down the street and a virus too small to see that may be anywhere. I am worried about the safety of my family’s health. I am scared of the unknowns… and so much is unknown right now. But I combat this concern, this worry, and this fear, with good information from trusted sources.

As I listen to and follow the advice of the Grey Bruce Health Unit, I feel more in control. There are things I can do to mitigate the risks of the virus to myself and others. So, I continue on and gather more resources and build more skills to counter the worry. And as I do, I am more empowered to increase my safety and that of my family.

Another huge worry at this time is money. Money is always a concern but, like with other issues in our lives, it has become a more urgent issue for many. This is also a time of learning and here are a few lessons related to finances that we can share.

1. Your mental health and finances are linked.
A recent survey by the Mental Health Commission of Canada and the Conference Board of Canada found that concerns about finances and employment status during the current pandemic significantly impact people’s mental health.

“Financial health influences overall health. Respondents who had secure employment and high income reported lower levels of mental health concerns than their unemployed and lower-income counterparts.”
Being aware that your finances and mental health influence one another is the first step. The next steps are understanding what resources are available to help you with both your finances and your mental health, and reaching out for help. Call 211 or visit https://211ontario.ca/ to find out about mental health and financial supports in your community.

2. Adapt your spending habits.
Knowing how much money comes in and out of your household each month is always a good idea. At a time of uncertainty, it becomes even more important. There is a difference between a regular budget and a crisis budget. Regular budgets look at your typical income and expenditures; Crisis budgets take your regular budget and strip away non-essentials. The hope is that by switching to a crisis budget in times of… crisis, you will minimize the financial impacts and be able to return to a regular budget faster.

Write down all of your income sources and the amounts that come in regularly. Add them all together to get the total. Then write down all the monthly fixed costs that you usually incur. These are things that have costs that don’t change like rent/mortgage payments, car payments, insurance payments, utilities and phone bills, etc. Then write down all the other things you usually spend money on, like groceries, debt payments, eating out, delivery, taxies, retail, etc. Add all your costs together to find the total amount of your basic needs. Subtract your total income from your total spending. You have just made a regular budget.

In order to make a crisis budget, review each item and think about how that item will change during a crisis. For income, think about where the money comes from and how reliable the source is. Which amounts are going to stay the same and which are going to change? Now look at each item in your costs and ask yourself some questions. Is this essential? Can I survive without this right now? Can I defer this cost for a period of time? What will be the consequences of deferring it? After you have reviewed both your income and costs, subtract your new total income from your new total spending. You have just made a crisis budget.

Adapting your spending habits to follow your crisis budget is the next step. That is not easy, but doing this will ideally minimize the amount of time you need to remain on a crisis budget.

3. Use all available sources of income and review relief options.
If you have lost income, you may qualify for financial assistance from the government. Based on your individual and family circumstance, you may be eligible for the Canadian Emergency Response Benefit (CERB) or Ontario’s Support for Families. If you receive social assistance, there may be emergency benefits available. Contact your case worker for more information. It is important to make sure you fit the eligibility criterion before applying as you may have to pay back income at a later date if you were not eligible and received a payment.

It is also important to look at payment deferral programs offered by lenders and utility companies. Deferral means that you pay the costs at a later date. You will still need to pay these costs at some point and interest fees may not be waived. Look closely at the real costs of deferring payments which means the actual cost and the interest/fees that will be charged. Even paying a portion of these payments on the regular schedule will help minimize the debt load you will carry going forward and the impact of double payments on your later budget. Talk to your lender and providers to find out about their individual programs.

To learn more about programs to help raise your income or lower your expenses during COVID-19, check out Prosper Canada’s Financial Relief Navigator at https://financialreliefnav.prospercanada.org/en

4. Avoid increasing debt, if possible.
You may do everything you possibly can to match your income and spending and still not be able to make ends meet. Debt may be your only option. Keeping your debt as low as possible will help you move through and recover from this and other crises. Not all debt is equal. If you have to incur debt, look at credit options with lower fees and interest rates. These often include home-equity lines of credit. Credit cards have higher interest rates. Pay day loans usually have the highest fees and interest rates. Use the best credit options available to you in your individual situation. Speak with your banker to understand your individual options.

Know that you are not alone! The pandemic has brought to light many precarious situations and so a lot of people are in scary circumstances in which they have never found themselves before. Others already lived in crisis situations that have been made worse by the impacts of the pandemic. You are not alone and you don’t have to go it alone.

The United Way of Bruce Grey has a Financial Literacy Program, along with many other programs, that can help support you through this time. If you would like help looking at your budget and discussing options in a non-judgemental, supportive environment, reach out to us at advice@unitedwaybg.com or 519-376-1560. You can see all of our programs at http://www.unitedwayofbrucegrey.com