Managing Debt During COVID-19

Managing finances and debts is hard for everyone, but when someone is going through a difficult time, adjusting in a new country or is struggling to find a job, that struggle takes on a whole new level. This article will tackle the subject of better managing financial situations especially for those who are unemployed or new to Canada. 

Having a good control over one’s finances and maintaining a budget is generally a good practice because we never know what situation we may face in our personal or professional lives, especially when the job markets are fluctuating, we never know when we might lose our jobs. So it is better to always be prepared.

During a crisis, we should try to avoid unnecessary spending especially if the only source of financial inflow is the aid from the government.so let’s start with a few concepts that would help us become more familiar with the options available to us during unemployment or a financial crisis.

During a crisis, in order to manage our finances, the first step we can take is to start calculating how much money is available to us on a monthly basis and how much money we have spent. This is called the cash inflow outflow calculations.

Cash Inflow and Outflow

Cash inflow is the money coming in. It could be either from a job or jobs,  a rental income,  or any type of income that one may be receiving  as revenue

Cash Outflow is all the payments, whether it’s the money being spent on groceries,  cell phones, or utility bills such as power, gas, internet, property taxes, etc …

It is very important to have a clear understanding of what’s available to us and what’s left at the end of the month.  It is also important that when we have control of our wallet per se so liberating those cash flows right now can help us focus on the things that really matter like providing for the family, food, shelter clothing, and the basic necessities. , And that is why the government of Canada comes up with programs to provide some financial relief to Canadians during a crisis like the current pandemic. 

Net Worth

In a nutshell, net worth is really everything we own of significance (assets), minus what we owe in debts (liabilities). Assets include cash and investments;  our house and other real estate, cars or anything else of value we own. Liabilities Include everything we owe to others such as the bank, car payments, insurance and other institutions.

Money Finder Calculator

Money finder is an expense tracker tool. It is a tool that financial advisors use to calculate how much money we have left to save We have to insert the numbers we make every month, then hit the annual frequency. .We also have to add any extra cash inflow like any bonus etc.  Then we have to enter our expenses and it categorizes all the entries, such as housing, transportation personal and financial commitments etc.  This gives a very detailed result when all the information is entered correctly. People are often surprised to see the results.

Your Credit Score

When banks check for credit scores they look at what they call “The five C’s” of credits. so they look at your Character – how we behave with our debts.  Do we pay them on time etc? Do we pay late stuff like that part of your character is also the ability to save either for a rainy day or your future education if you have some savings built-in your accounts that account for part of your character so your credit score goes up and down and usually the best way to keep your credit score excellent it is to always pay your debts on time and never use beyond 50 percent of any credit card or any other product so it’s important that you manage credit judiciously meaning that you don’t live beyond your means, and not too overspend which is one of the things that the banks look for

Depreciation 

For those of us who  like buying and owning what we call “toys” such as muscle cars, boats, motorcycles, etc, we  should keep in mind that when investing  in those things, they lose value quickly and it’s more of a debt rather than an investment

Unemployed? What Can be Done?

Strategize:

Being unemployed is unfortunate but if we find ourselves in that situation, it’s important to strategize.We should try to rely more on the amounts that we  earn rather than the amounts which can be borrowed  potentially from the bank especially because credit cards have ridiculous interest rates which can reach up to 20 to 22 percent

Negotiating payment deferrals with financial institutions is another option. Deferral is not necessarily debt forgiveness but is the opportunity for us  to liberate some cash flow which can be utilized towards other important things 

Keeping Your Expenses to a Minimum

One thing which can be done during a crisis when it comes to cash flow is to keep our expenses to a bare minimum and try not to overspend, try to eat at home as much as possible to avoid flashy sales and discounts. It is important to realize that during a crisis, we  are in survival mode

Call all Your Credit Card Companies

To see if they have any available option for an interest rate reduction. A lot of  financial institutions offer periods of lower interest rates for six months or a year,  but you have to call and activate those options so if you don’t let the bank know that you’re struggling financially they won’t be able to help you because you have to submit an application over the internet or call to let them know your situation so that they can work with you

Call Your Car Insurance Company:

Another thing which can be done if we are unemployed or are not on the road as much is to check with the car insurance companies if they can provide us with a reduction in the premium because we will be less of a risk if we aren’t driving as much. I called my insurance company and i was able to reduce my monthly payment by $50 since I’m working from home and not driving to work due to COVID19

CERB

The Canada Emergency Response Benefit (CERB) gives financial support to unemployed and self-employed Canadians who are directly affected by COVID-19. If you are eligible, you can receive $2,000 for a 4-months period (the same as $500 a week)

EI  (Employment Insurance)

This government program provides temporary wage assistance to unemployed or laid-off workers while they look for a job or to upgrade their skills. The EI benefit also provides special assistance to workers who are going through an illness, pregnancy, caring for a newborn or newly adopted child, a critically ill or injured person. Workers receive EI benefits only if they have paid premiums in the past period and worked more than 900 hours during the working period

Amalgamation (Unit Your Debts)

Amalgamation is the process of transferring higher interest rate debt towards a more cost

Efficient ones, uniting all your debts, and putting them all together. From a management point of view, it is easier to control your debt in that way so instead of you making five different payments towards 5 different institutions it’s better if you can transfer over all those debts into a single facility like a line of credit or a consolidation loan.  the good thing is when you transfer those debts towards a line of credit for instance instead of you paying 22 for those credit cards you will be paying between six and eight percent so it’s a huge difference

Study & Earn while Learning

While unemployed, one can have a lot of free time. Why not utilize that time and start investing in oneself?  why not use that time to upgrade one’s education and start a new career? It’s important to realize that if we want to have a job that pays well, we need to have an education that will help us get that job. Especially for newcomers, finding a suitable job without the Canadian experience can be very difficult. In order for them to continue their careers where they left them back home, it is important to get an education that will prepare them for the Canadian workforce.  ERP college, a leading IT and business college in Calgary can help with that. ERP college provides flexible morning, evening and weekend classes. The courses are short and career-focused with practicum. It will help newcomers to enter into the job market in their respective fields.  Extra Funding is also available to students through the Canada Student Emergency Benefit program. The college provides online and interactive training to students in  the following programs.

  1. Medical Office Assistant – 37 weeks
  2. Pharmacy Assistant – 29 weeks
  3. Office Administration. – 44 weeks
  4. Financial Accounting and Payroll system – 44 weeks
  5. Digital and Social Media Marketing – 24 weeks
  6. Hospitality and Tourism Management — 64 weeks
  7. Business Analysis for Business Intelligence – 12 weeks
  8. Big Data for Data Science – 12 weeks

Full online training. a free laptop to start your course ASAP. Government loan plus grant (extra grant announced for 2020) plus a living allowance help provided by the college, most courses include practicum

Student Loans and Government Grants

A student loan is a concept that is really important for us because there’s a lot of myths around it, for instance, a lot of people believe that the loan has to be paid immediately as soon as the education is complete which is not the case. In fact, student loans will give the student a six-month grace period once he or she has finished their education to allow them to find and plot employment. Moreover, the government allocates a time horizon to repay the student loan back to be either 10 or 15 years and that is one of the debts that is a right for every Canadian or newcomer

If you’re going to school and you are planning to take time off and become a data scientist they know once you finish your studies you will have a better-paying salary, that is yo you will be regarded to the eyes of the bank and it’s considered an investment because you’re investing in yourself and hopefully you will earn a higher salary. Moreover, every student is eligible to government grants on top of their student loans, the grants are meant to cover the student expenses during the time off, the grant is subject to the student conditions and obligations and wether if they have children or not

Savings Accounts

Controlling one’s spending is a key step in order to start saving. It may be tempting to go and buy that new iPhone or this new TV but the rule of the thumb is “don’t buy if not needed” instead of putting that money in a savings account is a much better option. if we start a savings account it will pay up to three percent on those funds so we can set up an aggressive savings strategy that will help us achieve our financial objectives like r kids’  education, saving for the future, etc.

RESP (Registered Education Savings Plan)  

education for the future. The government will give us access to additional funds in which they contribute up to two thousand dollars a year.

In future, if your kid decides that to take a different path or a different route that money can always go back to you but it’s a good investment vehicle to encourage parents to invest in their kids education right after they’re born and starts building up their wealth so instead of them struggling at the beginning they’ll have already a bit of a chunk of money available to them when they reach 18 so they can pursue their education

RRSP (registered retirement savings plan)

strategy so we  don’t pay taxes as much right now while we’re earning but later in life when we  are retired and receive less income. it ll be the right time to retrieve your RRSP 

For instance, let’s say you earned $80,000 this year and then you purchased $5,000 through RRSP so you will be taxed on the $75,000 rather than 80 so once you place those funds into that investment the government your tax return because your investment on your future increase your tax return will be higher so it is a good strategy to start building up your wealth

TFSA  (Tax-Free Savings Account)

(TFSA) is an account in which contributions, interest earned, dividends, and capital gains are not taxed, and can be withdrawn tax-free. While it’s called a savings account, a TFSA can hold certain investments including mutual funds, securities, and bonds. 2 This account is available to individuals ages 18 and older in Canada and can be used for any purpose

Conclusion 

Finding a job in Canada can be very difficult especially during crisis, the best what we can do is to educate ourselves about all the available options and then choose wisely what is our next step toward the future, being aware of how the financial system works in Canada and what are all the available options can help save so much money, on the other hand upgrading your education to suit the Canadian market can unlock a lot of opportunities.

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