Balancing Your Budget Through A Crisis Is Part Of The Process
A world financial crash is happening and we’re all suffering mentally, physically and emotionally as this 2020 virus pandemic sweeps the nation.
A financial alarm had set Canadians into a panic not knowing how they will pay rent/mortgage or put food on the table.
Consumers were rushing to the grocery stores clearing shelves and spending far beyond what they could afford in panic.
We’ve since been assured that grocery stores will be fully stocked and operating through this pandemic.
For some of you who went overboard, this may come at a cost to you especially if you put it all on credit or used up the cash you needed.
Where Will I Get Money From During The Financial Crash
Over 1.5 million Canadians have applied for Employment insurance because of the crisis and the system is overwhelmed.
Many Canadians are struggling to get through to talk to someone and fear not getting money on time.
The Canada Emergency Response Benefit (CERB) has been put in place and will be available to those in need.
No Canadian should have to choose between protecting their health, putting food on the table, paying for their medication or caring for a family member. – Source
As retailers, big businesses and come to a halt Canadians are left relying on help from their employer, emergency savings, government assistance, and employment insurance.
Prime Minister Justin Trudeau says new federal benefits for those losing income due to COVID-19 will be in people’s pockets within 10 days of their applications.
Trudeau says the application process for the new programs will open soon. The government has now merged new EI programs related to COVID-19 into a single allowance.- Global News
The Canadian government has put a wage subsidy program in place for all businesses small and large to help with the decline in revenue.
Those applicants must have suffered at least a 30 per cent decline in revenue because of the coronavirus pandemic, he said, noting that the goal is to ensure as many people as possible can keep their jobs and paycheques.
No matter how hard we try sometimes no amount of money saved is good enough however it’s better than nothing.
Interest Rates Drop
With the Big 5 Banks in Canada lowering their prime rate to the lowest it’s been in years sitting at 2.45 they are working to help us weather the storm.
The prime rate impacts the rate of borrowing such as loans and mortgages and may take time to recover.
Even so, very few people are borrowing money right now because what is there to buy unless you’re in the market for a house? Perhaps investing while the markets are low?
However, as interest rates go down mortgage rates are slowly going up as bank revenue is down and they are feeling the pressure.
The banks still need to earn revenue which is why prime and variable discounts are slowly vanishing unless of course, you’re a preferred borrower.
Instead of getting Prime minus 1, the banks have shrunk that discount by 75-85 base points and likely won’t end there.
Typical five-year fixed rates are also rising. Rates at large Canadian bank are now at 2.99 per cent to 3.04 per cent versus around 2.49 per cent to 2.59 per cent at the end of February, McLister said. – Ratespy.com for Bloomberg
We’re stuck inside hoping and praying this is all a dream, but it’s not.
We may never see anything like this in our lifetime again but perhaps our children might.
Do I think we were prepared for something like this to happen?
We can only do the best we can and learn from these experiences.
Living Through A Depression
My wife remembers her nanny talking about the great depression of the 1930s and what she learned in school.
There was nothing nice about it but she does remember her nanny urging her to save her money in the bank.
It wasn’t uncommon for Mrs. CBB to see her nanny using coupons and reading the grocery flyers for deals.
Are we in a depression again?
Perhaps but even so we should not think it could happen again.
Panic Through A Financial Crash
In the meantime, many Canadians have been forced to from the bottom up by rebalancing their budgets.
When a financial crash started to become a reality in March 2020 it was only then panic set in.
People were and still are being laid off or told to work from home or to come in working reduced hours.
Nothing messes with your mind when something this big affects the roof you live under and the mouths you feed.
I’ve received so many emails from readers who are not sure what to do with no income until the CERB arrives.
Canadians in need of financial help know they will get assistance from the government but have limited to no savings.
We knew there was this virus but I’m not sure to what extent the population knew it would cripple us.
Perhaps the term cripple doesn’t even begin to describe the devastation it has caused.
Now, we are living through a financial crash that in many ways is causing Canadians a huge amount of uncertainty.
Financial Crash And Your Retirement Investments
My employer has recently put out a memo urging those close to retirement the opportunity to take it early without penalty.
Sounds good if you’re near retirement which I’m not.
Our retirement investments were hard to look at last month as they tanked 2.20% equivalent to $28,400.
This downturn is worse than the 2008 financial crash that affected investments of Canadians all over the country.
Although we are still young and have time to see our investments recover not everyone will be so lucky.
For those on the verge of retirement, this financial crash may be costly for them in the short and long-term.
What this means is that it may derail their plans for early retirement or retirement at all.
Even worse, outliving their retirement savings.
Living Your Retirement Before You Retire
In short, social distancing and not being able to spend or earn money is a good indication of what retirement might be like without savings.
This is becoming a wake-up call or life lesson for many Canadians who have put off saving for their future.
Personally, it has made me question what I will do when I retire even if we do have money saved.
If you are struggling to get up now with nowhere to go or do what will motivate you when you retire without savings?
Essential Workers Paddling Us To The End
First off, we thank everyone on the front-lines helping us through this pandemic as we couldn’t do it without you.
Not only are people feeling immense pressure about finances so are those who are out in the front-lines still working.
We feel the stress going to get groceries or having to fill up with gas but essential service workers may get lost through their demanding circumstances.
This is a situation where we all need to help each other out with but by protecting ourselves at the same time.
It’s mindblowing not being able to see something that can kill you. That’s the reality we are all facing.
Everything we touch becomes stressful because we just don’t know if we will be the next one gasping for air.
Rebalancing Your Budget During A Financial Crash
As we sit back and watch this pandemic unfold we still have to live which means re-balancing our monthly budget.
I’ve always said to my readers that a budget is not a one size fits all.
What this means is that you need to visit your monthly budget, every month.
Even if you do qualify for the CERB it’s important to take a serious look at your monthly budget through this financial crash.
The CERB would cover Canadians who have lost their job, are sick, quarantined, or taking care of someone who is sick with COVID-19, as well as working parents who must stay home without pay to care for children who are sick or at home because of school and daycare closures.
The CERB would apply to wage earners, as well as contract workers and self-employed individuals who would not otherwise be eligible for Employment Insurance (EI).
For example, just because you have $400 slated for groceries doesn’t mean you can afford that much each month.
If you’ve been laid off and you rebalance your budget and find that you only have $200 to spend that’s what you spend.
Go into your budget spreadsheet and make the changes accordingly so you don’t overspend.
This is where big-budget problems emerge especially when we set it and forget it.
You must review your financial situation every month and rebalance your budget as necessary.
Or, you spend less in a specific category because you don’t have the amount of money to fund it.
As you may see above is a snapshot of our monthly budget.
I went over the budget categories that we could easily rework to fit our current financial needs.
For example, we won’t be needing our monthly allowance so we can use that money towards another category or just get rid of it.
This is what you need to do even if you are working with a tight budget.
No Money No Budget
For many of us who aren’t working with no income until government relief is paid out this can be unsettling.
Having to rely on friends and family to drop food off on your doorstep or borrowing money to make ends meet.
I still urge you to rebalance or create a bare-bones budget so you are prepared when you do get some money coming in.
Either way, it’s a sad time for Canadians especially those who were unable to put any emergency savings aside.
If anything this financial crash will have taught every one of us the importance of saving money.
This wasn’t the way it was supposed to go down but most often it’s not until a serious situation arises.
Quick Tips For Rebalancing Your Budget
First off, if you’re not budgeting please consider downloading my free excel budget or print a free budget.
Even if you are working from home and your employer is paying you please consider the following budget rebalancing.
Just remember that although this seems tight and tough that it’s hopefully only going to be temporary until we get back to normal.
The idea is to save your ship from sinking now and in the future by adopting new financial practices and available services that will assist you with budgeting.
- Apply for CERB if you qualify as soon as it’s available to do so.
- Review your monthly budget and alert everyone you owe money to if you are unable to pay due to the pandemic ie: Mortgage, Rent, Credit Card, Utilities.
- Have some form of liquid cash available at all times in a bank or a fireproof safe at home.
- Cut out any unnecessary budget categories such as entertainment and allowance.
- Lower budgeted amounts where possible to the bare bones
- Stop shopping and spending money including online shopping
- Find a way or devise a plan to save money for emergencies
- Use the time you have indoors to spring clean and sell what you can for cash
- If you must buy something consider second-hand and no-contact pick-ups
- Grocery shop via express pick-up eg: Walmart Grocery or Zehrs, delivery (eg: Instacart) or ask for help from friends and family. Many local businesses may also deliver for free or for a small fee such as a butcher or market.
- If you must grocery shop in-person get in and get out. Go armed with a grocery list and limit the time you spend in the store and self-distance. If you can’t save as much as you’d like on groceries do the best you can to follow your budget.
- Use what you have on hand before buying more including repurposing
- Ask to borrow something from friends and family to avoid going to the store
- Sanitize and continue to exercise physically and mentally
- Stay home and practice social distancing when out of your home
Lastly, you may wonder what some of the above has to do with rebalancing your budget through this financial crash?
Every tip above can and will affect your budget if you don’t become mindful of what is happening.
Stay Focused During Tough Times
Most of all find things to do that will keep your mind clear and body active.
Gently, I encourage everyone to consider growing a garden this spring and summer.
Learning how to live off the land will always help you to save money, at least on groceries.
Don’t let the fear of your financial crash get the best of you and trust that the government will be there for you.
In the meantime, do your part by reconsidering how you earn, spend and save money.
Discussion: How have you rebalanced your monthly budget for this financial crash?
P.S If you need someone to talk to don’t hesitate to message me although I can’t give financial advice to but can guide you. Talk to your financial advisor or banking representative if you need help.