In recent weeks, Canadians have been asked to practice “physical distancing” to slow the spread of COVID-19. That means millions of Canadians are working from home or, increasingly, not working at all as countless restaurants, retailers and non-essential services have shut down until further notice. Markets too are turbulent. Some Canadians may be facing a loss or interruption of income in the midst of some very uncertain circumstances. It’s understandable that many of us are concerned about money during this time.
While many Canadians will take a hard look at their finances as they work to make ends meet, there are some things you may wish to consider if applicable to you.
1. We‘ve been here before
In the past 40 years, the Canadian economy has suffered through four formal recessions, defined as two consecutive quarters of negative economic growth. Many economists, including those at TD Economics, suggest that COVID-19 and the impact of mass self-isolation may tip us into a global recession in 2020. But here’s one thing to consider: History has shown that, for every major drop, there has followed a period of growth. Whatever happens in the months to come, many Canadians are likely to feel a squeeze financially – particularly those who may be temporarily laid off – but these events are situational and if history repeats itself, they will be followed by a period of recovery.
2. Some of us are likely spending less
As Canadians focus on self-isolation and physical distancing, there are many things we’re not doing: dining at restaurants, going to shows, shopping at the mall or even paying for transit and gas for our daily commutes. What that means is that many of us are spending less than we normally would. One thing you may want to consider is calculating how much less you’re spending and redirect extra funds to a savings account. Bolder investors may even see the current market environment as an investing opportunity.
3. You may be able to defer some payments
For those who are facing temporary layoffs or lost income due to COVID-19, making mortgage payments and other loan payments could be a real concern. Each of the major banks has offered to work with personal and small business banking clients to defer some critical payments (including mortgage payments) for up to six months. This may provide some short-term relief for those worried they may not be able to meet their usual obligations. Individuals are encouraged to reach out to their lenders to find out what options are available.
4. Our tax refunds can help
The federal government announced that the new deadline to file a tax return is June 1, 2020. That means Canadians will have an extra month to file their tax returns. But here’s a reason you may not want to delay: If you expect to receive a refund, you may consider filing your return quickly to help get that money in your account sooner. As of March 9, 2020, the average tax refund was $1,820. For some of us, that’s real money we could use right now.
5. Your plan may be already built for a shock
When building an overall plan for your finances, it’s generally good practice to consider the view and plan accordingly. Will you need this money in the near future or not for a number of years? This advance planning may also include contingencies for a loss of income, such an emergency fund or plans for low-interest borrowing through a home equity line of credit. If retirement is still years or decades away, there should still be time for savings and investments to recoup their losses. For many Canadians, it may make sense to revisit their plans. For others it can be a time to take a deep breath, hold steady and take a little break from the market news.
6. We’re not alone
Regardless of the time we spend apart from each other right now, there’s one thing worth remembering: We’re all in this together. In recent weeks, the Canadian government has announced several aid packages for Canadians to help with loss of income due to COVID-19, as well as a number of measures to lighten burdens on small and medium-sized businesses. The Bank of Canada has cut its interest rate, thereby lowering the cost of borrowing for millions of people. As the impacts of COVID-19 continue, it may be reasonable to expect governments around the world to continue to monitor the situation and provide additional measures of support.
If you’re feeling added anxiety about your finances, that‘s only natural. Hopefully we’ve given you some ideas to consider during this time.