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Emergency personal budgeting because of COVID-19

For those of us who had a solid financial plan in place, now is the time to follow it. We can rely on the 3 to 6 months of living expenses set aside in a savings account. If the crisis persists longer, we can draw on the 5 to 10 years of fixed income savings set aside in case the stock market crashed. If we bought stocks or mutual funds using a financial planner, now is the time to call that person and draw on their expertise for which we likely are already paying. Unfortunately, many of us have no financial savings set aside because life was tough before COVID-19. However, at least one bank is also offering free financial planning advice to their customers. Call your bank and ask.

Here are my opinions of what we need to do now. First, we must promptly apply through the COVID-19 Canada Emergency Response Benefit program if we have lost all of our income for at least 14 days and meet the other qualifying tests. We also apply to our provincial government programs. In Prince Edward Island, there is the COVID-19 Income Support Fund for a one-time payment of $750 if we have lost our job and otherwise qualify. Through our employer, we can access the Emergency Relief-Worker Assistance Program for temporary amounts of $250 per week. Remember that we will need to pay tax on any grants next year.

Our employer may also apply for support to keep us working, through wage subsidies and other programs. Other provincial programs may apply, for certain individuals, such as Emergency Childcare Services for essential workers, the Temporary Rental Assistance Benefit, and deferral of student loans and property taxes.

The federal government is extending deadlines for filing tax returns and paying balances owing. They are making some additional payments through the GST credit and the Canada Child Benefit. They have arranged for additional services by non-profit organizations, such as food banks and emergency housing centres. Local private businesses are helping out by offering various free services. Financial institutions have agreed to defer mortgage payments for up to six months. At least one bank is waiving the cost of interest on top of interest because of this deferral; ask your financial institution if they will do this.

For federal programs, visit https://www.canada.ca/en/department-finance/economic-response-plan.html#individuals; for PEI programs, visit https://www.princeedwardisland.ca/en/topic/covid-19 . For links to the federal and all provincial and territorial sites, visit FP Canada at https://fpcanada.ca/news/govt-overview-covid-19.

We can call our local contacts, such as the United Way, our church, our municipal councillors, provincial Members of the Legislature and federal Members of Parliament.

Next we need to look inward. After all, ultimately we are all responsible for our own situation in life. Weu2 need to spend less, extend payment terms and find more income. If I am sitting home with my feet up, watching TV, drinking beer and waiting for someone to deliver money to my front door, I am going to be gravely disappointed. If I already have bills owing that I know I cannot pay, I should be calling those businesses right away to ask for special consideration. There is an art to this. First, I will not receive anything if I do not ask for it. Second, if I am making demands and being rude, I will not be successful. If I call up politely, ask kindly for some special consideration and tell my creditor when I hope to make the next payment, I will likely be treated with respect, especially if I have been reliable in the past.

Third, if I offer to make some payments on a regular basis, regardless of how small, I will be showing my good intentions and be more likely to succeed with my request. If I promise a payment and cannot make it, I need to call before the due date with a new plan to avoid being considered unreliable.

Not only would I like to ask for more time to pay, given the significance of this crisis, I would like to ask if they could forgive the overdue interest for me. If I do not have the courage to ask for that today, I could ask for such forgiveness (or a reduction) of the arrears interest when I actually make my payment. My mortgage, heating oil, electricity, cable TV, telephone, insurance and other companies are likely expecting a call from me.

Of course, if I ask my creditor to wait for his or her money, I probably should not be seen lining up at the beer store or leaving the grocery store with party supplies and junk food. My creditors and my landlord may be in just as much trouble as me. Fair is fair, and perhaps I should offer to help my landlord out by doing some maintenance around my apartment building while I am home and not working. Even bigger companies will be finding it difficult to go without money on behalf of thousands of customers.

What about my trip south that was cancelled, and I did not have cancellation insurance, which I admit was a mistake. I lost my non-refundable deposits. Maybe the tour company has some flexibility in spite of their written policy. Some tour operators would have received refunds because the hotels, restaurants and theatre venues are closed, and airlines or charter bus companies are no longer going to those destinations. Maybe they received refunds and would be willing to help me out with at least a partial refund. It would not be fair for them to be making money off of my bad luck.

But wait. I really have not made any personal sacrifices yet. According to Statistics Canada, in 2016, the average PEI household spent $60,135, excluding income taxes, for 2.4 persons. The lowest 20% of households spent an average of $28,000. I may have some room to cut back. If I can save 10% of my expenses, that is enough to make a few rent or mortgage payments. A few dollars here and there will add up substantially. I should cancel any monthly subscriptions that I do not need – I can restart them later. I can adjust my cell phone package to the actual amount of data that I use each month and eliminate my home landline if I seldom use it. I can change to a cable TV package covering only the TV stations that I watch. I am cancelling or deferring my costs for the gym, the spa and expensive hair styling and, of course, cutting back on that beer and wine. I should shop based on the list of what I need and for products that are on sale.

I should review my car, house, life and all insurance coverage. Can I increase my deductible amounts within reason? Has my house insurance coverage been automatically increased each year to a level higher than I need? Do I have only what I need and/or can I get quality coverage cheaper by shopping around? Of course, I will not cancel any policies until new ones are in place. I have lots of time in my hand to shop around. In fact, I made a list of many things we all can do called “Managing Your Cash Flow – Finding More Cash” and posted it on my website at www.corkumfinancial.ca.

I may need to ask my parents or family for a loan, but I will offer to pay them interest to be fair, which may also provide some tax benefit if I cannot pay them back. That is assuming my banker cannot help me further at a cost I can afford.

If I am not financially or mentally strong enough to do this, I will contact a credit counselling service. For example, in PEI, a counsellor from Family Service PEI or Credit Counselling Services of Atlantic Canada can help me work on a budget. Finally, if none of this is enough, I will telephone a Trustee in Bankruptcy and ask for complimentary discussion about my options. These trustees do not only handle bankruptcies; they also assist in putting together consumer proposals to settle certain debts over time, at a lower amount, without needing to go through bankruptcy.

If I am unemployed and hungry, maybe I should look at any job for which I am capable, such as helping out the farmers getting ready for planting season. I can always return to my regular job when it becomes available. Meanwhile, maybe I can upgrade by work skills by taking courses on the Internet, giving me a chance for a better wage when I do get back to work.  If I am still working, I need to work hard, whether at home or my workplace, to keep my job against increasing competition for it. If I demonstrate dedication and hard work, there may be a raise or promotion in it for me.

This is a lot to do, but drastic times require drastic measures, and if I am underemployed, I have the time to do so. In the meantime, I need to avoid all those scams offering to help me but asking for cash or for confidential information to steal what little I have left. And once I figure out an appropriate budget plan, since I am not working, perhaps I will have some time to volunteer to help others. Of course, I recognize what I do impacts others, so I will maintain social distancing, keep my hands washed, have patience with others and be a good human being.

True personal stories:

Unexpected crises occur- take the challenge to help yourself and you will get through it:

Susan’s Mom had no career training, and had stayed home to raise her family while Dad worked hard as a self-employed carpenter. Suddenly, Dad died and Mom was left penniless, with three children to raise on her own. She chose to work as a minimum wage fish plant worker to try to support her family. She worked hard to reach bonus levels of production. Susan and her siblings offered to do chores for neighbours, mowing lawns, helping local farmers and working weekends at the fish plant when they were old enough. With all this hard work, and the help of government student loans, Mom was proud to see all three children attend community college or university and succeed in their chosen careers.

Work hard at everything you do, and life will get better:

John graduated from culinary school, but could not find a job for his skills. He was offered a job at a restaurant as a dishwasher. He went home and complained to Mom about the horrible job. Mom’s wise advice was “Perhaps if you do a great job at washing dishes, your boss will see your potential for something better.” John followed Mom’s advice, and washed dishes faster than anyone else ever did – and then offered to help other staff with their jobs. Within a couple of months, John was promoted to being a chef and undoubtedly will eventually reach his dreams.

Blair Corkum, CPA, CA, R.F.P., CFP, CFDS, CLU, CHS holds his Chartered Professional Accountant, Chartered Accountant, Registered Financial Planner, Chartered Financial Divorce Specialist as well as several other financial planning related designations. Blair offers hourly based fee-only personal financial planning, holds no investment or insurance licenses, and receives no commissions or referral fees. This publication should not be construed as legal or investment advice. It is neither a definitive analysis of the law nor a substitute for professional advice which you should obtain before acting on information in this article. Information may change as a result of legislation or regulations issued after this article was written.©Blair Corkum

Co-Parenting and COVID-19

See this link

Advice on sharing your children during this crisis – be good to each other for the sake of the children and each other, as difficult as these times are.  Please.

Blair Corkum, CPA, CA, R.F.P., CFP, CFDS, CLU, CHS holds his Chartered Professional Accountant, Chartered Accountant, Registered Financial Planner, Chartered Financial Divorce Specialist as well as several other financial planning related designations. Blair offers hourly based fee-only personal financial planning, holds no investment or insurance licenses, and receives no commissions or referral fees. This publication should not be construed as legal or investment advice. It is neither a definitive analysis of the law nor a substitute for professional advice which you should obtain before acting on information in this article. Information may change as a result of legislation or regulations issued after this article was written.©Blair Corkum