Adjusting your budget during COVID-19

Has your budget taken a hit since the pandemic? Financial planner Angela Iermieri* is here with her best tips to help you take control of your budget.

Updated February 2, 2021

1. Take a deep breath

The pandemic affected us all. There’s so much we can’t foresee and we don’t know how the coming months will unfold. Given the circumstances, rethinking your financial priorities might mean putting some things you want to do on hold. That’s not easy, though. Before tackling your budget, take a deep breath and focus on the things you can control.

2. Calculate your “COVID-19 income”

3. Isolate your expenses

Before you get yourself into debt, take stock of your spending. Remember: while you might be spending less money in some areas (like transportation, clothing, leisure, going out, restaurants and travel), you might be spending more in other areas (such as streaming platforms, online buying of non-essentials, deliveries and outdoor gear).

Keep a more frequent eye on what’s coming in and going out so you can adjust your budget accordingly.

3. Try to put certain expenses on hold

If you have to use your savings, try these strategies first:

  • Find out if your municipality offers payment deferral on property taxes. A few months could give you the time you need to get control of your finances.
  • If it becomes challenging to make your monthly payments, including your credit card and certain other debts, contact your service providers to make payment arrangements.

A few things to pay attention to

  • Think carefully before taking advantage of payment deferral. Keep in mind that debt accumulated during the pandemic must be repaid, including deferred interest.
  • Avoid putting your insurance premium payments on hold. When you restart them, monthly payments and terms could change.
  • To keep your long-term financial objectives on track, continue your regular automatic contributions (like your RRSP or TFSA) if you can, or temporarily reduce them.
  • If, despite all the measures available, you need to resort to credit, exercise caution and avoid taking cash advances on your credit card.
  • Review your priorities instead of tightening your belt too much. That could mean putting certain goals or projects on hold, like renovations, or a new jacuzzi, pool, car, appliances or electronics.
  • Be wary of super sales. You can easily end up regretting that irresistible online purchase. If you need to, turn off certain notifications, delete your cookies and take advantage of the free returns that many merchants offer.

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. If not, read our tips on how to build one - This link will open in a new window..
  • Transfer to your chequing account money you’ve saved for bigger purchases you can postpone. You can use that to pay for more immediate expenses.
  • Take money out of your savings account before you cash out any investments, which often fluctuate. The spring 2020 market downturn, followed by an upturn over the following months, shows once again that stock markets can be volatile and the money invested should be part of a long-term investment strategy. For short-term needs or unexpected expenses, it’s best to dip into savings that aren’t tied to the markets. This will prevent losses if you take money out during a market downturn.
  • Only dip into your savings as a last resort. If you have to, cash out investments that haven’t taken a big hit. Take money out of your TFSA first if possible, since you won’t be taxed on those withdrawals. Remember: withdrawing money from your RRSP or other investment accounts could affect your long-term goals, so it’s best to try cutting back on your expenses first.

5. Monitor your budget

Creating a budget is great, but sticking to it and keeping it up to date is even more important, 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 drinking your coffee, Monday morning before starting the work week, or in the evening while you’re watching TV.

Get our tips for evaluating, improving and managing your budget - This link will open in a new window.

Should you use credit?

Credit is an option if you’re short on cash, but it should be a temporary solution.

“Choose the financing option with the lowest interest rate and shortest repayment term possible.”

- Angela Iermieri, financial planner at Desjardins

Before you turn to credit, contact your Desjardins advisor. We’re here to help you get some perspective.

Happy budgeting!

* Financial Planner and Mutual Funds Representative for Desjardins Financial Services Firm Inc.

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