How to manage the financial crisis during COVID-19Mar 30, 2020
As the COVID-19 situation escalates and our opportunity to flatten the curve is now, we have made the decision to temporarily close all BDO Canada offices, effective Wednesday, March 18. All BDO partners and employees will work from home for the foreseeable future. Let us emphasize that we are still open for business and are here to help. Our BDO teams will conduct consultations and sign-ups by phone or online meetings.
Facing the health and financial crisis of COVID-19 is a very trying and uncertain prospect.
If you are one of the millions of Canadians who have been temporarily laid off or lost their job because of the crisis, we empathize with you. If you don’t have an emergency fund to dip into for unexpected costs, we understand; most people don’t. And if you are worried because you don’t know how you’re going to pay your bills, we want you to know the resources and tools that are available to you.
The next few months will be tough for many Canadians. One of the best strategies for surviving the financial crisis of COVID-19 will be using every tool at your disposal. Here is an overview of the basics, from the government’s relief plan to accessing credit. We will keep you updated as new information is released.
Now is the time to keep a very close eye on your spending. Control what you can by preparing a crisis budget that tracks your monthly spending so you can cut back on all unnecessary expenses. The next step is to familiarize yourself with the help that will be available from government and financial institutions. Here is what we know so far.
What is the government doing to help?
The government continues to announce funding for their emergency response plan to help Canadians survive the financial crisis of COVID-19. The good news is that there will be help for many people who are suffering from the ongoing financial fallout of this public health emergency. What does that help look like?
Canada’s economic response plan, as of April 20, 2020
- Accelerated access to EI. If you qualify, the one-week waiting period before receiving your payments has been waived. The most important thing with employment insurance (EI) is to get your claim in as soon as you can. Remember that EI won’t fully replace your regular pay, only 55 per cent of your pre-tax income.
- Support for workers who don’t qualify for EI. One of the major components of the stimulus package is the Emergency Response Benefit intended to help contract or gig workers who don’t qualify or contribute to employment insurance. The government has pledged $5 billion to help the many Canadians who are part of the country’s growing gig economy. The government will provide a taxable benefit of up to $2000 a month for up to four months. The Emergency Response Benefit will be accessible through a secure web portal starting in early April. Applicants will also be able to apply via an automated telephone line or via a toll-free number.
- Paid sick leave for people who don’t have sick days. The same Emergency Response Benefit will also be available for any worker who doesn’t get paid sick days through their employer, including freelancers. If you have to miss work because you have to self-isolate or need to take care of someone with COVID-19, you can qualify without having to provide a doctor’s note.
- Increase in Canada Child Benefit. For parents with children under the age of 18, the Canada Child Benefit will be providing parents who already qualify with an additional $300 per child as part of their May 2020 payment. The increase intends to help parents who need to stay home to take care of their kids during school closures.
- Support for students. As well as suspending payments and interest of the federal portion of student loans until September 30th, 2020, the Canadian government announced the Canada Student Emergency Benefit in April which will give postsecondary students impacted by the crisis $1250 a month.
- Increase in GST credit. For low-and modest-income individuals and families, the refund will be close to $400 for single individuals and close to $600 for couples. You don’t need to apply for this payment, you will get it automatically if eligible.
- Tax deferrals. The CRA has announced that individuals and businesses can delay both their tax filings as well as their tax payments. The new deadline for filing your taxes has been pushed to June 1 (from April 30). In addition, any payments that you owe to the CRA between now and August 31, 2020 can be delayed until the end of August. Of course, if you are expecting a tax refund and are in need of some extra cash flow, file your taxes as soon as you can.
You can read more about the government assistance here.
How are financial institutions offering to help?
If you have a mortgage and your household income has been affected by COVID-19, you may be able to defer your mortgage payments. An announcement from the Canadian Bankers Association states that all of the 6 big Canadian banks will allow, on a case-by-case basis, their clients to defer – not skip – their mortgage payments for an indefinite period and do not face a deadline for having to seek relief. Interest which would otherwise be part of the deferred payments is added to outstanding balance and will either be incorporated into the monthly payment at the end of the deferral period or will be due upon renewal at the end of the mortgage’s term.
If you are having trouble making your minimum payments, on any credit product from Canadian banks, the best course of action is to call and talk to them directly. The five major banks will be reducing interest rates on their credit cards for customers who are deferring their monthly payments. The reduction amounts to around half, from around 19-20% to around 10-11%. If you are interested in learning more, please reach out to your bank directly.
Should I access available credit to survive the financial crisis?
Normally we would never encourage taking on more debt. In this instance, though, many people are in survival mode. As Shannon Lee Simmons says, “Extraordinary circumstances often require extraordinary measures.” Therefore, if you have no emergency savings and need to make ends meet, low-interest credit can be a resource. But we strongly caution you to avoid any type of high-interest credit, such as payday loans or easy-access online loans from alternative lenders.
If you have no other option to survive this financial crisis, credit can be a safety net as long as you have a plan to pay it back within six to 12 months after returning to work. It’s also important to reduce your non-essential spending to a bare minimum.
Are you worried about your debts?
If your debt payments are holding you back from surviving the financial crisis, contact a BDO Licensed Insolvency Trustee (LIT) as soon as possible. An LIT will meet with you over the phone and take the time to explain how each debt solution applies to your own financial situation.
In light of the current health crisis, our teams across the country are working from home, communicating with clients by phone or videoconferencing for sign-ups, general meetings and counselling (Zoom, Facebook Messenger, FaceTime, Skype, etc.). Our free initial consultations are also available over the phone so you can stay home and get the help you need.