How to manage debt while working from homeJul 09, 2020
Over the past four months, millions of Canadians have suddenly found themselves in a brand new work environment: their own homes. Change in your work routine can be difficult and it can take a long time to adjust. Add concerns about health, family and personal finances and it’s no wonder so many Canadians are feeling stressed and in need of help. The good news: working from home might be the opportune time to focus on relieving one of your stressors: debt.
Millions of Canadians have lost their jobs in the wake of the COVID-19 pandemic, and a quarter or more of Canadians say they’re facing a critical financial and debt situation. If you have been able to maintain your household income and job security while working from home, now is the time to plan for what’s ahead.
If you’re carrying personal debt, there are solid strategies that can help you avoid additional debt, and even reduce your debt during this stressful time.
Before you focus on your finances, acknowledge any work-from-home stress
If you’re going to effectively manage your debt, it will help to acknowledge any personal stress you’re experiencing. Adjusting to new methods of communication and the lack of in-person interaction can leave you feeling anxious, isolated and lonely at times.
Then there are those who find themselves working in a makeshift office alongside children, partners and/or roommates. Parents are juggling full-time childcare, homeschooling and work obligations. If it’s possible, try to create a separate work space where you can at least partially separate your work life and home life. This can help you focus on your work and feel more productive.
Finally, recognize that this is likely an unprecedented time for you and your household, and do your best to adjust your expectations. It takes time to create a work-from-home routine.
Debt avoidance is key
As you social distance and self-isolate during this ongoing pandemic, you may find yourself dealing with a range of emotions – worry, boredom, irritability, fear and more. Adjusting to high-stress situations, like working remotely or job loss, can increase the anxiety.
Worries about the future can lead to panic buying in larger quantities than your regular budget will allow. Boredom or depression can lead to impulse purchases that might trigger momentary joy, but can also result in additional debt. Try to be mindful of what you’re buying and how much you’re spending. Overspending can lead to debt, which can accumulate quicker than you anticipated.
Working from home can help you tackle debt
If working from home is new for you, it may be affecting your monthly budget in a positive way. Have you noticed that you’re spending less on transportation costs like fuel, vehicle maintenance, insurance or transit costs? Daily work-related expenses may have dipped, if you’re no longer buying daily lunches or coffee. Even clothing costs might be reduced for a while.
This is all good news when it comes to your debt repayment and emergency fund goals. There is no roadmap for this situation. But here’s the upside: if your household income has not changed and your monthly costs are lower, you can be proactive.
Make a plan to pay off your debts more quickly by reallocating any money you’re now saving to debt repayment. If you face reduced hours or a layoff in the coming months, you won’t have the additional stress of managing that debt.
Look for resources that will help with debt
Our debt repayment calculator can help you determine how payments will affect your interest charges. Financial help is available to borrowers affected by the crisis, but not everyone will qualify, and debts can quickly become overwhelming.
This online calculator from Get Smarter About Money also allows you to review multiple debts at once. So if you have car payments, outstanding credit card balances, bank loans, etc., you can prioritize your payments based on your individual debt goals.
If you’re unsure how to deal with your debt on your own, reach out to a professional. A Licensed Insolvency Trustee (LIT) can explain how to streamline your existing household budget and review the pros and cons of a debt consolidation loan. An LIT will also help you compare different debt relief options, including a debt management plan, consumer proposal and bankruptcy.
If your income allows, consider padding your emergency fund as well. Any money you can put towards emergency savings now will help you avoid future debt if you’re faced with unexpected expenses in the future.
In this current climate of emotional and financial uncertainty, it might seem counterintuitive to pivot and begin a new financial strategy. However, if your household income is sufficient, now is the time to try to safeguard your finances. Doing so can not only help you avoid debt in in future months, it can help to reduce your emotional stress right now.