10 tips to manage COVID financial crisis
Financial crisis can happen to anyone and at any time—whether in form of a medical bill, sudden job loss or even an emergency home repair. Any unexpected change in your financial situation can be extremely stressful and the COVID-19 pandemic presented even more disruptions.
Millions of Canadians are now faced with a harsh financial reality since the first lockdown was announced. Businesses across the country downsized leaving many unemployed and struggling to cope with the financial implications. Despite some relief measures being taken by the federal government, the uncertainties surrounding the pandemic has caused many to feel stressed and nervous.
So, what can you possibly do to manage your stress and reduce the financial burden on you during the coronavirus pandemic? While some factors affecting financial stability are beyond individual control, having the right financial knowledge can help be extremely useful in getting through these difficult times.
The most important thing is to quickly figure out how effectively adapt to the new financial realities during this crisis. Here are a few useful tips to help you better manage your finances:
1. Take advantage of government financial programs
The Canadian government has created programs as part of its COVID-19 Economic Response Plan to help provide relief to Canadians who are struggling financially during the pandemic. You can look up whichever one you are eligible for.
It is possible that you already qualify for existing government relief schemes such as tax credits or employment for low-income citizens. If you don’t qualify for any, you can always keep checking as new measures are still being introduced.
2. Use credit wisely
At times like this, it is very important to only use your credit properly to avoid running into more debt. There are many online calculators like Calculator.me that empowers you to make the right decision by taking into account the taxes and social security contributions due on your earnings and benefits—be it social assistance, housing, family, unemployment and in-work benefits.
Carefully compare the current repayment rates and terms on your credit sources and choose the one with the lowest interest rate. However, even with all the flexibilities, it is still important to limit your expenses as credit is still considered a debt.
3. Track and review your budget
During a pandemic-induced financial crisis, this is a very important tip if you’re committed to improving your finances. Drawing up a balance sheet—which is a financial statement on all your current assets and liabilities—can help you easily identify your current sources of debit and credit.
Having a budget essentially lets you track how much income you get against what your expenses are. You can even consider setting aside ‘emergency funds’ to ease the impact of any sudden expense on your overall finances.
4. Limit your expenses
Given the disruptions caused by the pandemic, you should immediately cut down spending on non-essential items. Not only would this save you money, but it would also help you reallocate your finances to more essential needs.
Carefully review your monthly expenditure and locate places where you can reduce costs.
5. Leverage on payment flexibilities
There are many banks, insurance firms, corporate businesses, governments, and municipalities that are offering people who have difficulties paying for services a more flexible payment plan.
So, rather than making an outright payment on a product or service, you can check what payment flexibilities exist with your supplier.
6. Seek discounts on automobile insurance
If you have a car, it’s time to let your auto insurer know about any changes in your driving habits. Whether you’ve switched to remote working, driver fewer kilometres than before or gotten laid off from work, you can inquire if you qualify for discounts on your insurance premiums.
7. Beware of fraudsters
Financial fraud has escalated during this period as fraudsters are taking advantage of the current circumstances surrounding COVID-19 to lure unsuspecting victims.
Always look out for red flags when approached by anyone with any offer that sounds too lucrative to be true. Before making any financial decision, think critically and ask plenty of relevant questions.
8. Avoid more debt
Don’t try to get out of debt by falling into more debt, especially during these uncertain times. Before you consider taking a loan, be sure your know the financial implications of your decision.
You should always consider alternatives to payday loans as they have very high interest rates on a relatively small amount of money. Taking a payday loan when you’re in a financial fix puts you in a very difficult situation of falling back into a debt trap.
9. Avoid emotion-driven investments
When the stock market starts to experience massive dips, it’s natural to feel worried about your investments. But it’s important to always keep your emotions in check and not make any hasty financial decisions.
You are bound to make poor financial decisions when you let your emotions get the better of you. Therefore, if you don’t feel confident about your decision, you can consult a reputable and licensed securities industry professional or investment banker before making any changes to your investment portfolio.
10. Seek professional help
If you’re feeling overwhelmed by the plethora of financial decisions you need to make, getting advice from a certified financial professional may be a great idea. There’s a wide range of products and services being offered by different finance professionals and it is important to choose one who is best suited for your current needs.
In conclusion, if you’re feeling nervous about your current financial situation, be rest assured that you’re not alone. However, trying out some of these tips is bound to help you improve your current financial situation and achieve your retirement goals.