If nearly 40 per cent of Canadians under the age of 55 lost their jobs because of the coronavirus pandemic, they would have one week or less of savings to cover costs like food and rent.
That’s according to an Ipsos poll, commissioned by Global News, which shows that while the average person has nearly three months worth of savings, “a significant proportion of Canadians have almost no capacity to pay for their bills without an income.”
While that situation has undoubtedly been brought into sharper focus by news that Canada lost one million jobs in March, it’s not a new dilemma.
People have been sounding the alarm about rising food and rent costs for years. More than a quarter of Canadians indicated they’d be out of money within a month if they lost their jobs, per a 2014 survey from the Bank of Montreal.
“I’m not surprised,” says Tracey Bissett, chief financial fitness trainer at Bissett Financial Fitness Inc. If anything, Bissett says, she’d guess the Ipsos poll is a little conservative.
“I’m thinking people might not know because one of the first reactions many people have is to put their head in the sand.”
Sixty per cent of those surveyed say they’re concerned about their ability to pay their bills — and that’s just one month into the pandemic. As Prime Minister Justin Trudeau said on April 9: “Normality as it was… (is) a long way off.”
That concern grows to 70 per cent among those under the age of 55, and likely with reason. While 12 per cent of people surveyed said they could survive up to a year with no new income, 78 per cent say they could only survive between zero and three months.
If you’re worried about losing your job or have already lost your job and are worried about surviving, four money experts offer up a brief roadmap for getting through.
But to start, Jackie Porter, a certified financial planner who recently wrote about the financial impacts of social distancing, says you’ll need to ditch any preconceived notions:
“People shouldn’t judge themselves at this point.”
Focus — It’s completely normal to be worried, scared and anxious, says Bissett. “Let yourself have those feelings, but try not to stay in them 24 hours a day.”
You can’t control everything, says Porter, so focus on what you can: “You can’t be resilient if you don’t think through what you control.”
Do you actually have no income? — If you lose your job, do you actually have no income? This is important to figure out, Bissett says. Although not everybody is eligible, the federal government’s new Canada Emergency Response Benefit (CERB) provides $2,000 per month.
Tap into your long-term savings — It’s hard to tell from survey results alone whether someone who says they’d be unable to pay their bills within a week of losing their job has no emergency savings or no savings at all, says Rona Birenbaum, founder of the financial planning firm Caring for Clients.
Ask someone, what do you have to pay your bills, she says, and most people respond with what’s in their bank account, not necessarily what’s in their tax-free savings account (TFSA) or their Registered Retirement Savings Plan (RRSP).
“There’s no shame in withdrawing money from a long-term savings plan to deal with a short-term crisis,” Birenbaum says.
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If you’re going to withdraw, keep in mind:
- If you withdraw from a TFSA, that money will be tax-free, while money withdrawn from an RRSP is taxable.
- If your income for this year is going to be lower than usual, the tax you’ll have to pay on withdrawing from a group RRSP will also be lower.
Budget — It’s imperative you know what money is coming in and what money is going out, says Porter.
“You need to figure out the cash-flow statement, otherwise you’re going to be paralyzed in fear,” she says. Having one lets you ask the right questions: “Do I have a gap? How do I deal with that? What will I need to do? What decisions do I need to make?”
Porter recommends checking out You Need A Budget or Mint or going old-school with a pad of paper to create your own. Once you have one, Bissett recommends taking a second look at some of your expenses. Are you paying for a transit pass that you no longer use? Is there an option to put that on hold?
Look at your list, she says, and ask: what can I cut?
Identify, delay and defer — Some half a million Canadians are receiving mortgage deferrals right now because of the coronavirus outbreak. What else can you defer? Bissett recommends calling about your mortgage, credit card interest amount and other bills, too — it’s worth the time on hold.
“You don’t have to wait until a company does something to ask for a reduction in fees or some kind of payment arrangement,” Birenbaum agrees.
If, in some cases, you can’t get a fee reduction or payment delay, Bissett says you’ll need to prioritize.
“You’ve got to focus on key aspects: you need to have a place to live, you need to have food to eat — what else?”
It might mean some hard choices, she says, but they can be made if you know what pandemic-specific rules are in place.
“We know that people can’t be evicted right now,” Bissett says, so if you are forced to choose between paying one bill and another, “maybe rent is the thing that doesn’t get paid.”
A temporary job? A side hustle? — Companies like Walmart, Amazon and Freshbooks are currently hiring.
So, Bissett says, if you lose your job, remember there are other ones:
“Maybe it’s not your dream, but when we’re in survival mode, we have to think about what would be good for the next couple of months to get us through until I can get back to what I’m best at.”
If possible, you can also turn your hobby into a side hustle. Not sure what that might look like? If you’re not sure, now is a good time to brainstorm, says Bissett.
“Reach out to family and friends,” she says. “Ask them, ‘If you thought I was going to start a business, what do you think I would do?’”
Talk to your family — “It’s time to be honest and ask for help wherever help is available,” says Birenbaum. It doesn’t necessarily have to include asking your family for financial support, she says. It can be about asking your family to support you emotionally in figuring out what you need to do.
“When we’re all alone in our fear, it’s challenging to think not just logically but in a structured, focused way,” Birenbaum says. So step away from the social media scrolling and the news cycle and approach your finances like a project with the support of family or really close friends.
Talk to the experts — Grant Bazian is president of MNP Ltd., a licensed insolvency company. And while that means he helps people file for bankruptcy, he says there are options before that — you just have to ask.
“We’re always thinking of creative ways to try to help people.”
Payday loans as a last resort — Of course, it’s good to have a rainy-day fund, says Bazian, but that doesn’t mean it’s possible. And while he cautions against going to payday loans, they are accessible. So if you need one, Bazian recommends being cautious.
“They can be expensive if you don’t pay attention to repayment,” he says, so use one like a last resort if you’re “in dire straits.”
Short-term plans that avoid hurting future you — While you need to get through an emergency situation, all four experts agree you don’t want your short-term decisions to make long-term headaches. Here’s what to keep in mind:
- Don’t make all your financial decisions around lines of credit, says Bissett, because you don’t know if or when banks might claw them back.
- To cut down on the interest payments that might really start racking up when you’re out of work, Bazian recommends consolidating your loans into one.
- If you can, avoid putting every expense on your credit card, says Bazan, adding: “It can build up quite quickly… and just making minimum payments will never really dig into your principle.”
- Government benefits like CERB are taxable, Birenbaum says, so take care. If possible, set aside some money now to avoid a future tax season surprise.
- Keep tabs on your credit score, Porter recommends. Deferring your mortgage or other payments with the permission of lenders shouldn’t affect your credit score, but sometimes the banks get too busy to stay on top of it.
Exclusive Global News Ipsos polls are protected by copyright. The information and/or data may only be rebroadcast or republished with full and proper credit and attribution to “Global News Ipsos.” This poll was conducted between April 3 and 7, with a sample of 1,006 Canadians from Ipsos’ online panel. The precision of Ipsos online polls is measured using a credibility interval. This poll is accurate to within plus or minus 3.5 percentage points, 19 times out of 20, had all Canadian adults been polled.