These challenging times haven’t just upended our daily routines, we’ve had to take a second look at our finances too. Has your budget taken a hit? Here are 5 tips to help you out.
1. Take a deep breath
Whether you had to postpone going on vacation or purchasing your dream home, revisiting financial priorities can mean putting important projects on hold. It’s not always easy. Before you make your budget, go for a walk or take some deep breaths. Remind yourself that this is only temporary.
2. Calculate your “COVID-19 income”
As a result of the coronavirus, your income might have dropped or even disappeared if you lost your job. The first thing you need to do is make sure your income is equal to your expenses.
You’ll have to go over your income (and maybe your savings) and calculate how much money is coming in. Figure out what financial assistance you can get from the government and some financial institutions. This could make all the difference in your budget. Our budget worksheet is designed to help you out.
3. Isolate your expenses!
Before you get yourself into debt, update your expenses according to your new, at-home lifestyle. While you might have saved money in some areas (transportation, childcare, clothing, leisure, going out, restaurants, trips), there are new expenses to consider (IT equipment, office furniture, bandwidth enhancement, streaming platforms, products needed to follow security measures). It’s a good idea to take stock of your spending to avoid any surprises. And remember, you can defer certain expenses. Governments, municipalities, school boards, Hydro-Québec and some financial institutions are offering relief measures.
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.
- ransfer money you’ve saved for projects you can postpone into your chequing account.
- Withdraw money from your savings account before cashing in any investments, considering the current state of the stock market. The value of your investments will likely go back up in the long term. Patience is often the best strategy.
- Only make withdrawals from your investments if you’ve exhausted all your other options. If you must, cash in the investments that didn’t take a big hit in the last few weeks and think of taking money out of your TFSA instead of your RRSP, because the withdrawals are tax free. Making withdrawals from your investments could have an impact on your long-term goals, so it’s a good idea to try reducing your expenses first.
5. Stay on top of it
Coming up with a budget is great. But it’s more important to stick with it, 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 you drink your coffee, Monday morning before getting started on your work week, or the day you get paid.