As we prepare to enter another week of the pandemic and all the unknowns associated with the state of the world, it is hard not to feel anxious about what the future holds. For many, the worry lies with their finances. With businesses uncertain about what tomorrow brings, layoffs have been inevitable leaving people in the dark about their careers and financial situations. While we can't control what the future brings, there are some things we can do to help navigate these unprecedented times and help us better prepare when it comes to our finances. We spoke with award-winning Money Expert, Financial Counsellor, and the host of Mo' Money Podcast, Jessica Moorhouse on the best way to manage your finances during COVID-19 and all the important things we need to know.
Since the lockdown has begun, the government of Canada has really stepped up with helping its citizens get through this pandemic. What are some main important information about relief options that people should know about?
There are a number of relief programs and financial support now available to Canadians who are struggling right now because of COVID-19. The one that’s been helping a lot of Canadians who have lost work is the Canada Emergency Response Benefit (CERB). It’s a taxable benefit of $2,000 for every 4 weeks, and you can get that benefit for up to four 4-week periods (for a total of $8,000). Since it launched in early April, the criteria has expanded to include more Canadians. Before, you were only eligible if you lost all of your income due to COVID-19. Now, you can earn up to $1,000 per month and still be eligible.
Another benefit is the Canada Emergency Student Benefit (CESB) which specifically helps students. The CESB assists students and new graduates who are not eligible for CERB or EI, but are unable to work due to COVID-19. This benefit is now available from May to August 2020 and will provide $1,250/,month for eligible students or $2,000/month for eligible students with dependents or disabilities.
What are your top tips on how people should manage their finances during this time?
This is the time to start taking your finances seriously. That means making a budget or spending plan so you have a clear idea of how much money is coming in and going out. Tracking your spending to know specifically how you’re spending your money and what your spending habits are. Taking a good look at your debts to see how you can balance making your regular minimum payments with meeting your other financial obligations. This is the time to avoid putting your head in the sand and face your financial situation head on so you can better prepare yourself what the coming months and the rest of the year.
Now let's talk investments. During a time when people are getting laid off and the economy is tanking, investing may be the last thing on their minds, but do you think it's worth looking into if people have the means to invest?
That’s a very good distinction. For anyone who doesn’t have an emergency fund (or a fully funded one of 3-6 months’ worth of your living expenses), who has a lot of debt, and is just trying to stay cash flow positive, this is not the time to invest. Right now your focus should be on preserving your capital because we don’t know what the future will look like (a possible recession?).
Before you invest even your first $1, you need to take some time to understand the basic principles of investing and make a solid investment plan
For anyone who is in a financial situation where they can afford to invest, you’re one of the priviledged ones! But that doesn’t mean you should just start buying stocks because you’ve been hearing the stock market is on sale. Before you invest even your first $1, you need to take some time to understand the basic principles of investing and make a solid investment plan. What are your investment goals? What is your time horizon? What is your risk tolerance? What route do you want to take in terms of investing (DIY investing, using a robo-advisor, hiring an investment professional to manage your portfolio for you?). These are all questions you need to answer before diving in.
A lot of people are hesitant about dipping into their savings but many may have no choice. How should people be handling their savings during this time?
If you need to dip into your savings to pay for your necessities, that’s what your savings is for! The goal is to avoid getting into expensive consumer debt, like credit card debt or a line of credit that has a high interest rate. That being said, you want to see where you can cut back in terms of your spending first and foremost. This will help you stretch your savings to make it last longer. Then, once you’re in a place where you are earning money again, make sure to replace any savings you spent.
Jessica Moorhouse is a millennial money expert, speaker, Accredited Financial Counsellor Canada®, award-winning blogger, host of the Mo’ Money Podcast and founder of the Millennial Money Meetup.