Posted on Friday June 12, 2020

Personal finances during a pandemic: How to lighten your financial load

If there was ever any question about whether savings were important, the current situation has answered it loud and clear. Sound financial planning includes having an emergency fund you can fall back on if you lose your job or see a drop in income, even temporarily. Now is also a good time to review certain expenses and take advantage of payment deferment and assistance programs.

Here are 4 steps to improve your short- and long-term financial position in the current financial setting.

Step 1: Reduce your expenses

Before deciding if deferring payment is a good solution for you, take a moment to really assess your financial situation.

• Make a budget that takes your new reality into account. If you can, put off some non-essential expenses.
• Put any money you have accumulated into a high-interest savings account or a TFSA to create an emergency fund.
• Suspend automatic bill payments or adjust the amount of your pre-authorized debits in AccèsD if needed.
• Avoid overextending your credit card, if at all possible. Interest rates on cash advances are higher than on other types of loans, such as lines of credit.

Step 2: Defer payment

UNI is now deferring interest on minimum payments for many products, including car loans and mortgages. While a payment holiday is appealing in principle, remember that interest will continue to accrue during the deferment. Weigh the pros and cons before opting for this solution.

If your finances are looking shaky, we recommend making an appointment with your advisor so you can make the most of the assistance available. But if your financial situation is stable, it’s a good idea to continue making your usual payments to avoid racking up additional interest. 

Step 3: Revisit your long-term financial plan

If your financial situation is the same as before the crisis, your long-term plan probably hasn’t been affected. You can keep the same savings plan in place.

But if you’ve lost income due to a layoff or lower-than-expected business revenue, it’s important to revisit your strategy. Your UNI advisor will help you make the best decisions to stabilize your situation over the short, medium and long haul.

Step 4: Create (or add to) an emergency fund

An emergency fund saves you from having to sell assets at the wrong time just because you need cash, for example selling your house in a buyer’s market or liquidating your RRSPs and paying tax penalties.

The Canadian government recommends keeping 3 to 6 months of income in your emergency fund. So someone who earns $40,000 a year should have an emergency fund of $10,000 to $20,000. If you save $65 a week, you can reach that goal in 3 years.

Already have an emergency fund?

Great! Keep adding to it for an even better cushion. Check out the savings tools UNI has created to help you achieve that security as fast as possible.

In times like these, our mission to help our communities meet their financial needs is more important than ever. Feel free to contact your UNI advisor. We’re here to help you make the right decisions for you.