1. Take a deep breath
Whether you had to postpone going on vacation, purchasing your dream home or buying that new bike, revisiting financial priorities can mean putting important projects on hold. It’s not always easy. Before you make your budget, go for a walk or take some deep breaths. Remind yourself that this is only temporary.
2. Calculate your “COVID-19 income”
- As a result of the COVID-19 pandemic, your income might have dropped or even disappeared if you lost your job. The first thing you need to do is make sure your income is equal to your expenses.
- You’ll have to go over your income (and maybe your savings) and calculate how much money is coming in. Here are some things to take into consideration:
- Figure out what financial assistance you can get from the government and Desjardins by reading our article: Finding your way around our relief and support measures. This could make all the difference in your budget.
- If you’re expecting a tax refund, file your taxes as soon as possible. Given the circumstances, it’s important to get the most out of your tax return - This link will open in a new window..
3. Isolate your expenses!
Before you get yourself into debt, update your expenses according to your new, at-home lifestyle. While you might have saved money in some areas (transportation, child care, clothing, leisure, going out, restaurants, trips, etc.), there are new expenses to consider (streaming platforms, online shopping for non-essentials). It’s a good idea to take stock of your spending to avoid any surprises.
You can defer certain expenses. Governments, municipalities, school boards, Hydro-Québec and some institutions like Desjardins are offering relief measures.
Try to avoid:
- Putting your insurance premium payments on hold. When you reactivate them, monthly payments and terms could change.
- Putting your automatic savings contributions on hold. If you can, keep them (or temporarily reduce them) to stay on track to meet your long-term financial objectives.
4. Dip into your savings as a last resort!
If you have to use your savings, try these strategies first:
- Use your emergency fund if you have one.
- Transfer money you’ve saved for projects you can postpone into your chequing account.
- Withdraw money from your savings account before cashing in any investments, considering the current state of the stock market. The value of your investments will likely go back up in the long term. Patience is often the best strategy.
- Only make withdrawals from your investments if you’ve exhausted all your other options. If you must, cash in the investments that didn’t take a big hit in the last few weeks, and think of taking money out of your TFSA instead of your RRSP, because the withdrawals are tax free. Making withdrawals from your investments could have an impact on your long-term goals, so it’s a good idea to try reducing your expenses first.
5. Stay on top of it
Coming up with a budget is great. But it’s more important to stick with it, especially during a pandemic. An easy way to make it a habit is to schedule it. Choose a time that works for you: Sunday morning while you drink your coffee, Monday morning before getting started on your work week, or the day you get paid.
Should you use credit?
Credit is an option if you’re short on cash, but it should be a temporary solution and informed choice.
“Choose the financing option with the lowest interest rate and shortest repayment term possible.”
Before committing to credit, contact your Desjardins advisor. We’ll make sure that you’ve covered all your bases. You’re not alone—we’re here to help you make sense of it all. Don’t be afraid to contact us.
* Financial Planner and Mutual Funds Representative for Desjardins Financial Services Firm Inc.