How to pandemic-proof your paycheque

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Back in January 2020, we didn’t think about something like pandemic financial habits, but recruiter Cynthia Coulis is now saving 20 per cent of her paycheque just in case. “I work on a contract basis and so I never know how long I will be working. If the pandemic lasts a long time, I will be in good shape to continue living my lifestyle without too many changes.”

Why you need to think about your pandemic financial habits

Whether you’re a contractor or employed full-time or part-time, the effects of COVID-19 hit many people hard financially. As Canada moves to reopen the economy, people are still concerned about the long-term effect on their finances.

Millions of Canadians lost their jobs. Statistics Canada’s monthly job survey found that from February to April, 5.5 million workers were affected. This included a rise in unemployment of 3 million and a COVID-related increase in absences from work of 2.5 million. In June, employment rose by nearly one million, building on the 290,000 jobs added in May. Overall, employment is picking back up, which is good news for job seekers and reassuring for people who are employed, but we’re not clear yet. If you are employed, what can you do to pandemic-proof your finances just in case?

Start an emergency fund

“[The pandemic] has been a much needed wake-up call for a lot of people in terms of their financial situation,” says Darryl Brown, a Chartered Financial Analyst and independent investment consultant at You&Yours Financial. He says that if people are not thinking about setting aside savings, they should take the opportunity to start an emergency fund.

Standard advice is to save three to six months in your emergency fund, but that can vary. If you are able to apply for employment insurance (EI), you could opt to save less as EI will cover some of your living expenses. If you won’t get EI, it’s better to save six months of expenses at least. It’s better to save as much as you can due to the uncertainty around how long the impacts of COVID will last and its long-term effects on the economy.

Re-evaluate your investment strategy

“People tend to think about their investments and savings as a bit of an island,” says Brown. “They put their money in the stock market and hope it goes up. That’s how we’ve been trained to think about that.” He says that with COVID-19, if you feel like there has been a change in your job security, that might mean a change in how you think about investing. “Maybe you need a less aggressive portfolio or maybe you need more in terms of your savings or expenses.” This could mean shifting your asset mix to more bonds and fixed income versus equity funds.

People are trying to survive right now, says Brown but he says that when you have the mental space and feel comfortable, take the time to map out your goals and objectives for your pandemic financial habits. “Take stock if there’s any change there and how you might be feeling,” he says, then use that to see if you need to adjust your investment strategy.

Pay off debt

Canadians carry a lot of debt, and this situation has increased that. Our debt-to-income ratio is now 176.9% as of June 2020. So if you have debt, try to pay it off as quickly as possible. Continue paying items like mortgages and car loans because you need shelter and a way to get to work and to buy groceries. Then look at any remaining debt and start with the one with the highest interest rates, such as credit cards. Put any extra money towards paying it off, then move on to the next debt. While you do this, continue to pay the minimum payments on other debts so you don’t miss a payment and take a hit to your credit score.

If you don’t have extra money to put towards paying off your debt, consider transferring the debt to a line of credit or a credit card with a lower initial interest rate, so you have less to pay over a period of time. Do this if you can pay off the debt during the initial offer. Some credit cards charge a transfer fee, and this is usually a percentage of the balance. The fee could be worth it if you end up paying less overall or you can apply for a card that has a 0% transfer fee.

If you have a significant amount of debt, a consolidation plan can reduce the debt owed and give you one affordable monthly payment.

Ask for deals

While you’re going through your budget, now is the time to ask for deals on your monthly and annual expenses. If you’re no longer commuting to work, contact your auto insurance provider and ask for a discount. Phone and internet providers did offer a no-cap on data usage for the first 90 days after the pandemic started in March. Those have expired but check with your provider to see if they have any offers. There’s no harm, frankly, in asking for deals on any of your bills and if the companies have better options, programs or packages for you.

Re-evaluate your budget

An Angus Reid survey found that 69% of Canadians are spending less on non-essential items like gifts and going out to restaurants. Coulis is also considering tweaks to her budget. “I have considered cancelling a few subscriptions like Netflix and Spotify and I may reduce my monthly charitable donations,” she says. As a runner, she would do a few destination races every year, which costs money (entry fees, equipment, travel, food). But as all races are cancelled, she no longer has to budget for them.

Take a look at your budget to see what you could cut without feeling too deprived with your new pandemic financial habits. This could be streaming services, like for Coulis, a gym membership, or reducing the number of times you tap on the UberEats or Skip the Dishes app per week.

“Learn to cook,” says Brown. “Friend after friend has told me that they are saving so much money.” He says that he’s not saying that learning to cook will make a monumental change in your finances but little adjustments like that can help save money.

Explore other revenue options

You don’t have to get a second job but having multiple revenue streams can not only ease the stress of losing a primary job, but it can help you make a little extra income that you can put towards your goals. It could be something like selling items you no longer need or freelancing. The money earned can go towards building up your emergency fund or paying off debt.

Check your insurance

This is key if you have a family or are self-employed. Know what you and your family are covered for during the pandemic. If you’re self-employed, a disability or critical illness insurance policy could provide some money if you are unable to work. COVID-19 itself is not covered by critical illness insurance but some providers will cover claims if a covered condition is triggered by the virus. Talk to your insurance provider to see what’s covered by your policy. When it comes to rates, they won’t change unless you make adjustments to your policy.

Good news, but…

The economy is moving in a positive direction, but things could change. Looking at your pandemic financial habits and protecting your finances from upheaval will help you adapt quickly should anything change with your employment situation.

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