Category Archives for "Budget"

Benefits and Impacts of Deferring your Mortgage Payments

By Randall Orser | Budget , Covid-19 , Personal Finances

The impacts of Covid-19 have been felt by everyone in Canada, and many are struggling financially due to loss of work or decreased hours.  For those needing help there are financial relief programs that can offer much needed breathing room.

The ability to defer a mortgage payment is an option that has been offered by most lenders. It enables people to free up cash for the short term by deferring a significant financial obligation but it is not the right decision for everyone.   Here are some of the pros and cons of deferring your mortgage payments:

1. Being able to defer your mortgage payments can provide much needed peace of mind in these difficult times.  It will improve your monthly cash flow which will cover your urgent life expenses if you are experiencing a reduction of income .

2.  Don't just miss a payment as this comes with negative consequences such as your mortgage becoming delinquent causing a negative impact to your credit rating and risking potential foreclosure.  It is important to seek advice sooner rather than later to explore your options and make informed decisions.  Work with your mortgage lender to set up the deferral if you decide that this the best action for you to take.

3. When making the decision to defer your mortgage payments it is important to understand that the unpaid interest accrued during the skipping period will be added to the outstanding principal on your mortgage, which means that you will owe more on your mortgage in the long run than if you did not defer any payments.  Reducing your monthly payments will also lead to a longer repayment period and payment of more interest over time.

4. There are other ways to free up funds if you don't think that deferring mortgage payments is a good idea for you:

  • Refinancing your Mortgage - if you have equity built up in your property you may be able to access it to pay out other debts or create some cash flow.
  • Increasing your Mortgage Amortization - this will help you to lower your monthly payments but you will be spreading out your payments over a longer period of time.
  • Adjusting your Monthly Budget - staying at home will probably have decreased your monthly spending so it is a good idea to identify where you are saving money and make sure you allocate it to necessities rather than things that you don't need.
  • Look at other deferral options - you may be able to defer your property taxes, utility payments and payments on credit cards and loans these might be better options than deferring mortgage payments.

Deferring your mortgage payments can help your immediate financial situation but you need to carefully consider the potential future financial impacts.  You should speak with your financial advisor to determine if this is the best thing for you to do or if there are better options for you to free up cash to tide you over.

From an article by Diane Amato

Tips for Pivoting your Business During Covid-19

By Randall Orser | Budget , Business , Covid-19 , Employees

In the past few months we have seen companies take amazing leaps to change the way they do business and manufacturing businesses retool to make new products to meet changed market demands.  From distilleries and hair product manufacturers making hand sanitizer, to clothing manufacturers making surgical gowns, other industries making ventilators and fine dining restaurants turning to take-out and delivery.

It used to take companies a long time to develop strategies to change manufacturing plans but during the pandemic it has been necessary for businesses to make new plans at lightening speed in order to stay in business and keep their workers employed.

However many companies are struggling to meet this new reality and need help to reinvent themselves.  Lior Zehtser from Connect CPA says that "To pivot, you really need to think outside the box and be comfortable with taking a risk and experimenting with a different or unique business model.  Your idea obviously has to take the friction away from close contact, so that anything delivery based or "contactless" would be a great start.

Here are some ideas that might help you to make some decisions:

1. Solving Delivery Dilemmas - the need for delivery especially in the food services sector is insatiable. An outside of the box way of shopping and delivering unique goods to customers is a good idea for a new business. It can be expanded from food to all kinds of products that people would like to have but are not shopping for if they are only going out for necessities.   

2. Going Back to Basics - instead of producing your whole range of products concentrate on the ones that are most popular to make best use of your resources.  Companies are listening to what consumers want the most and are limiting their production to those high demand products instead of producing their whole range of products.

3.  Provide Entertainment -  as families are spending more time together at home offering them a diversion to relieve the boredom is a great idea.  Specialty bookstores and game stores are offering delivery services which are successfully increasing their bottom line.

4. Add to your Product Mix - for example if you are a company that usually delivers drinks or snacks to offices pivot to making home deliveries and add other basics such as milk, eggs and bread and fruit and vegetables.  Many restaurants are doing this by adding many of their sauces and desserts etc to their menus so that people can cook at home with gourmet foods as well as having meals delivered.

5. Make a Product to Help to Fill Health Needs - many distilleries are making hand sanitizers and hand wipes and offering them for free or at a discount to essential service providers.  This is a way to give back to the community and builds brand loyalty.   Many clothing manufacturers have pivoted to making face masks and surgical gowns as well as fashion face masks for sale direct to customers.  

6. Take your Business Online - live streaming and video conferencing are the new ways to stay connected and do business.  By doing this you can keep in touch with your customers and suppliers but at the same time have the chance to acquire a completely new audience.  

7.  Join a Group of Other Companies Seeking Solutions - to build contacts and nurture ideas to help to create opportunities for your business and others.

8.  Get Inspired Globally - look online and find inspiration from what others are doing.  Learn how other businesses around the world are adapting and discover new inventions from companies and individuals that are helping in the pandemic.

9.  Support your Community - connect with charities in your area to see how you can help your neighbours.  Offer discounts on the purchase and delivery of your products, everyone loves a deal and it brings in customers which will help your bottom line.

10. Keep yourself up to date with the latest trends - no matter when the crisis ends the way that businesses operate has changed forever.  It is important to stay on top of changing consumer demands and have a flexible plan to allow your business to keep adapting to meet those demands.

From an article by Margaret Craig-Bourdin

What Small Businesses can do to Survive the Pandemic

By Randall Orser | Budget , Covid-19 , Employees , Small Business

Businesses are doing all they can to navigate the unknown and to stay afloat during the pandemic, including laying off staff and reduced hours.  However up to 30% of small businesses are going to be unable to survive according to Jasmin Guenette from the CFIB.  

Here are a few actions that small businesses could take that might help them to deal with their situation.

  1. Check your reserves and insurance - talk with your accountant about your cash flow and reserves and how they can be best used.  Also check your insurance policy to see if there is anything that can be covered for lost income.  Even though many businesses have business interruption insurance, as this is a pandemic it does not count. 
  2. Have honest conversations with your staff about how you are going to try and keep them on the payroll but what might need to be done if your situation worsens.  
  3. Brainstorm with your staff for any ideas about how things could be done differently to save money and layoffs.
  4. Think about allowing your employees to work from home if it is possible in your business. If you can save on rent and utilities for your small office that could help your bottom line.
  5. Think about reducing business hours if possible.  This will give employees extra time to carry out cleaning and sanitizing for the office or if your are open to the public.
  6. If your business is open make sure that you follow all health and safety protocols to ensure a safe environment for your staff and the public.  Make sure all staff are fully trained and know what is expected of them.  
  7. Talk to your suppliers and lenders about stretching your payments and make sure that you take advantage of all the government, provincial and municipal help available to you.
  8. Get help from your accountant and business advisors to decide which government programs are most appropriate for your business.
  9. Continually think and plan ahead to see what you can do to minimize the impact of Covid-19 on your business. 
  10. Consult useful resources geared to small business:

From an article by Margaret Craig-Bourdin                              

How the Pandemic is Affecting Canadian Businesses

By Randall Orser | Budget , Covid-19 , Employees , Small Business

Even though many small businesses have fully or partially reopened the financial effects of the pandemic have been disastrous.  The serious decrease in revenue has meant that many have had to take on debt in order to stay afloat and many are calling for further government financial help.

The Canadian Federation of Independent Business (CFIB) has been tracking small businesses through the pandemic and the most recent survey of more than 4000 businesses found that 40% of them have seen revenues drop by 70% and & 70% have seen revenues drop by at least 30%.  

Even with the easing of restrictions by provinces and municipalities allowing for small businesses to reopen it is going to be a long time until sectors such as hospitality and entertainment will start to show a profit again.  Ted Mallet the vice president and chief economist of the CFIB has said it is more difficult for small businesses to operate now and despite being patronized by people who love unique products and services, many of these businesses will not survive.

The new reopening rules mean that restaurants are only able to have 50% of their normal capacity.  They usually have a profit margin of 3-5% when times are good so despite having curtsied pick up and home delivery it is difficult for many to continue to hang on. 

The CFIB survey found that 34% of respondents were behind on their major bills such as rent, credit card bills and critical suppliers, that number is 47% in the hospitality sector.  More than 25% said that their biggest worry was having to close their business, they are borrowing money to keep going but are building up debt that is going to be difficult to pay down.  In addition they have the costs associated with the changes necessary to operate their business post lockdown.

Though it is doom and gloom for many businesses, due to a change in consumer behaviour there are some business that are thriving, including home-gym products, those selling renovation products on-line, hobby shops and bike shops but these businesses are in the minority.

From an article by Ethan Rotberg CPA Canada

How to Manage your Personal Finances During the Pandemic

By Randall Orser | Budget , Covid-19 , Personal Finances

The Covid-19 pandemic is causing financial stress for most Canadians as they are seeing their income reduced or eliminated and they are wondering how they will be able to pay their bills.

All levels of government have implemented emergency response plans including financial support and many financial institutions have stepped up to help by allowing people to defer payments and avoid penalties.  Here are some ways that you can reduce the financial impact of Covid-19.

The federal government started the $107 billion Covid-19 Emergency Economic Response Plan, with $52 billion direct support for employers and workers and $55 billion in tax deferrals for workers and businesses. Other financial assistance to families include:

  1.  A one-time increase to the GST tax benefit and increases to the Canada Child Benefit.
  2. A six-month interest free moratorium on the repayment of student loans'
  3. A 25% reduction in minimum withdrawals from a RRIF and variable benefit payments under a RRSP to help reduce the impact of volatile markets on senior's retirement savings.
  4. There are additional benefits to Canadians available from their province and municipality and they should visit the relevant websites for more details.
  5. Financial institutions are offering deferrals of mortgages up to six months for some customers as well as loans and relief on credit card payments and interest.

What can Canadians do to help themselves financially during the pandemic?

  • If you need to borrow money make sure that you consider the interest rates and how you will repay the loan, do not dig yourself too far into debt that it will be difficult to get out of once the pandemic is over.
  • If you have to tap into your emergency funds do it strategically, maximize all income sources first, create a more stringent budget and spending plan then consider tapping into your savings if you need to.  Always start with cash funds and TFSA's as you will not have to pay tax on that income and withdraw RRSP's on non-registered tax investments as a last resort.
  • If you are still working making saving money a priority after you have covered your necessary expenses this will help you should your job become affected.
  • Maximize help programs from utility companies that can include lower rates, deferred payments and flexible payment plans to assist residents and companies.  Many cell phone providers have removed data caps on internet and data plans and waived countrywide long distance fees.  They are also offering flexible payment plans.
  • Consider which bills you can eliminate such as subscriptions to digital services or retailers, and monthly donations.

It is important to continually assess your financial situation and if you can make changes that will help you to be more prepared for the future.

From an article by Sophie Nichols Jones 

Covid-19 Now is the Time to get Serious About Your Financial Wellness

By Randall Orser | Budget , Personal Finances , Personal Income Tax , Retirement

A survey done for the MNP Consumer Debt Index when the Covid-19 pandemic started showed that 49% of Canadians asked were $200 or less away from being able to settle their bills and 25% of these people said they were already behind on their payments. In this uncertain economic environment are many are unable to realize their life goals and some even face bankruptcy.  

Lack of financial security is a big cause of stress, lack of sleep and tension in relationships as people and couples are unsure about what their future will look like.  In fact 41% of Canadians say that money concerns are the biggest cause of stress in their life  The fear of the financial impact of the pandemic is a greater contributor to mental health than getting sick or losing a loved one.

This information begs the question "Why are people finding themselves in this financial predicament? There are a number of answers to this question including costs rising faster than wages which has caused many to incur debt, but the big reason has to be ignoring the necessity of financial planning.  Financial planning includes saving for the future, retirement and making informed financial decisions and living within one's means and building a emergency fund. The pandemic brings to the forefront this long avoided issue, it is time to become responsible for your financial health. 

Many use the lack of financial knowledge as a reason for not planning. This is no excuse for avoiding the issue as financial literacy can be gained from books, seminars, blogs, websites and from working with a financial planner, there is lots of help out there.  Here are some tips that may help your immediate financial situation:

  • Make a new financial plan, your income may have been reduced and you need to revise your budget and priorities accordingly.  If you are not able to pay your bills, you should not be contributing to your child's college fund making contributions to your RRSP.   
  • Don't worry about paying down debts quickly, make minimum payments and put the rest into an emergency fund.  Your emergency fund should be enough to cover three to six months of  expenses should your income be severely reduced.
  • Take advantage of the help that your bank may be offering such as reduced interest rates on credit cards, deferred mortgage payments and low interest loans or lines of credit to pay off higher interest debts.
  • Instead of making plans for the next 10 or 20 years make your financial plans cover a shorter period of time. 

Making the decision to start taking control of your finances or making your financial goals more realistic will help you to deal with the stress that the pandemic is causing.

See our previous articles for more information:

​Financial Skills you Should Have Learned in High School

Reasons why you Should Budget your Money

Personal Finance New Year’s Resolutions

By Randall Orser | Budget , Investments , Personal Finances , Personal Income Tax , Retirement

The start of a new year is the perfect time to take stock of your financial situation and see how you can make changes to improve it.   You need to make firm resolutions to help you get closer to your financial goals whether it be saving for retirement, a down payment for a house or starting a business.  Here are some considerations that you might want to add to your resolutions list. 

RESOLVE TO DO BETTER IN 2020 – Identify the financial mistakes that you made in 2019 and how you could have avoided them so that you are armed with that knowledge to help you avoid making the same mistakes in 2020.

Prioritize Your Debts – Make a list of all your debts and organize them according to the annual interest rate.  Plan to pay off those with the highest interest rate first, these will probably be your credit cards.  It makes no sense to save money in an account with a low interest rate when you are paying high rates of interest on your credit cards. You might want to also think about selling any assets that you might have such as matured savings bonds and using the money to pay off high interest debts. 

Open a Registered Retirement Savings Plan – It’s never too late to start saving for retirement.  Meet with a financial planner and let them advise you about the right plan for you.  Even if you only contribute $50 a month it soon starts to add up and any contributions will help to lower to your income tax bill. 

Rebalance Your Investment Portfolio -  Meet with your financial advisor to ensure that your investments are still working for you, and that once attractive investments are still that way or no longer appropriate.  If your financial goals have changed then you may need to rebalance your investment portfolio.  

Set up an Automated Savings Plan – If your willpower to save money is not too great then consider setting up an automated savings plan with your bank.  “Paying Yourself First” is one of the most effective ways to save money.  With an ASP a specific amount of money will automatically be transferred to your savings account at regular intervals before you have the chance to get your hands on it.  With regular deposits like this earning compound interest your savings will grow faster.

Collect Your Change – You may think that this is not a great way to save money, but you could be surprised!  Whenever you pay with cash save the change or take the money that you get back from recycling bottles and cans at the store and put it into a jar. At the end of the year take the change you have accumulated and use it to pay down debt.  

Commit to No Spend Days – Plan on taking regular no spend days or weekends, eat at home, find free entertainment and skip shopping.  This is probably best done during cold and rainy weather that makes you want to stay indoors.  Maintain the habit throughout the year to get the best financial benefit.

Get Healthy Without Joining a Gym – Save money on expensive gym memberships by doing free exercise videos on-line, working out at the park or taking winter hikes.  There are a number of free apps such as Fitbit Coach and Nike Training Club that you can use to do workouts at home.

Cut Back on Your Bad Money Habits – these usually include eating out too much and buying too many clothes. Identify what makes you want to indulge in your bad habits and try a different activity to replace it.  If you eat out too much try prepping your meals for the week on Sunday and ask friends and family to help you. 

Start Using Personal Finance Software -  This will enable you to keep track of where your money goes.  If you don’t know how much you spend on coffee, haircuts, movie tickets or eating out how can you start to cut your spending?

Read a Financial Book Regularly -  Some books recommended for Canadians are:

Personal Finance for Canadians for Dummies (2018) Eric Tyson

Millionaire Teacher (2nd ed 2017) by Andrew Hallam

Wealthing Like Rabbits by Robert R Brown

Worry Free Money (2017) by Shannon Lee Simmons

Happy Go Money (2019) by Melissa Leong

The Value of Simple (2018) – John A Robertson

The Latte Factor (2019) David Bach

Retirement Income for Life (2018) Frederick Vettes

Tips to Avoid Holiday Spending Mistakes

By Randall Orser | Budget , holiday season , Personal Finances

It is very difficult not to overspend when buying Christmas gifts, we all do it!  This year Canadians will spend an average of about $1593.00 up slightly from $1563 in 2018.   Although 41% of this is spent while shopping on-line, the remainder 59% is spent in brick and mortar stores.  As overspending at Christmas can adversely affect our finances going into the New Year it is important to make and stick to a budget when buying gifts.  Here are five ways you can save money on Christmas Gifts.

1.   Make a Holiday Budget and Stick to it

  • Allocate money out of your monthly budget to a gift fund
  • Make it a creative challenge to give carefully thought out gifts which have more meaning than expensive ones, think about giving something home-made.
  • Consider expectations set by family and social situations when making up your budget.  Your family might decide to only give gifts to the children but if not ask them to consider a lower spending limit especially if you have a large family.
  • Start shopping early, shop sales and purchase items throughout the year, this will make holiday gift buying less stressful.
  • Don’t forget to include travel, Christmas Cards, Wrapping, Decorations in your budget.

2.  Don’t Use Credit – if you charge everything to your credit card you will be paying for Christmas well into the New Year or even for years afterwards.  When people are shopping at Christmas, they tend to use their credit card instead of cash.  Use your debit card instead of your credit card, if you have planned carefully all year you will have the extra money in your bank account to do just that.

3. Plan Your Christmas List Well in Advance - This will help you to buy gifts throughout the year at sales such as Black Friday, Cyber Monday and if you are really organized even Boxing Day.  Make sure you keep a list of who you have bought gifts for to make sure that you do not buy for a person more than once or miss anyone out. 

  • Keep a running list of things to buy and watch out for the best price.
  • Planning ahead takes the worry out of finding the perfect gift and the last-minute gift buying panic.

4. Don’t forget to shop around – To save money take time to comparison shop. You should check prices on-line at two or three stores before you go shopping to make sure that you are getting the best price.

5.   Don’t leave gift buying to the last minute – Panic buying will more than likely mean that you will spend more as your choices will be more limited.   Plan to get all your shopping done before the holiday season begins.

6.    Buy one or two Extra Gifts – You may be invited to last minute parties and need to take a gift which can throw off your budget.  Buy a couple of generic gifts during the year so that you have them on hand if you need them.  A bottle of wine is always a good choice to take to a Christmas get together.  

  • Think about buying gifts that you would enjoy in case you do not use it.
  • Remember you can always return unused gifts.

7.   Encourage Christmas Gift Exchanges – Secret Santa gifts or draws are a great way to save money.  

  • You will only have to shop for one person instead of many which works very well in a work or large family situation.  
  • You may also be able to purchase a nicer gift for the one person than you would buy for several people. 
  • People love Secret Santa as it makes their shopping simpler.

8.   Give a Christmas Gift to Someone in Need - Instead of giving gifts to family and friends who do not really need anything, consider donating to a charity in their name.  You can also purchase an extra gift while out shopping and drop it off right away.  Doing good by giving gifts to those in need instead of family members will help to get you into the holiday spirit and it can also save you money.  

Cyber Monday or Green Monday – Will you be Shopping On-line?

By Randall Orser | Budget , holiday season , marketing strategy , Personal Finances , Retail

Most of us have heard about Cyber Monday, the first Monday after American Thanksgiving when retailers offer many deals for us to buy on-line, but what is Green Monday?  

Green Monday falls on the second Monday in December, the name is thought to originate from the green colour of the American dollar.  The term was originally coined by Ebay in 2007 to describe the best sales day on their website in December.  Green Monday marks the 10-day shipping period before Christmas and is so successful because people realize that their time is running out to buy and ship gifts to arrive for Christmas.

As other retailers also adopted this day to offer their own seasonal deals (some call it Cyber Monday 2) Green Monday became the third largest shopping day of the season with sales in the U.S. of over $1.6 billion in 2016.  The retailers that usually participate in Green Monday are Walmart, Amazon and Best Buy and though popular in the U.S. the day is not as important on the calendar of Canadian shoppers, but it will probably grow in popularity in the future. 

The first Monday after American Thanksgiving was named Cyber Monday by Shop.org in 2005, although at that time as not many people had high speed internet connections they did not participate.  However, as connections speeds have increased so has the spending on Cyber Monday.  It was the biggest shopping day of the year both in 2017 and 2018 surpassing Black Friday.  Nearly a third of shoppers in the U.S. begin on the day before Cyber Monday and top stores such as Amazon and Walmart start cyber week sales on Thanksgiving Day.

Why Cyber Monday is so Popular

  • According to Adobe Digital Insights 40% of shoppers like the 24-hour shopping convenience.
  • The same number of shoppers wanted to avoid the Black Friday crowds.
  • 30% of shoppers enjoyed the ability to easily compare prices on-line.
  • Almost 90% of retailers offer Cyber Monday sales with 45% offering coupons or a percentage discount.
  • Over a third of retailers offered free shipping and 36% of shoppers said they would increase their on-line shopping if shipping was free.

A few on-line shoppers surveyed said that they would not buy on-line due to expensive shipping charges, or they didn’t like that they could not see or handle their purchase, or thirdly did not like to wait for their items to be delivered.

Mobile Technology and Social Media

Over a third of shoppers said that they would go to social media to get information about Cyber Monday deals usually on a company’s Facebook page and two thirds check out reviews on the company website before making a purchase.   More than half of on-line retailers make sure that they promote their sales on social media and that their websites are optimized for mobile devices.  

Impact on Brick and Mortar Stores

On-line retailing is growing by almost 10% annually and in 2020 is expected to reach $523 billion(USD).  In 2017 over 60% of people in 16 countries said that their everyday transactions were on-line rather than in-store.    This growth in on-line sales is having an impact on brick and mortar stores with more and more declaring bankruptcy every year.  It has been predicted that 75% of shopping malls will close in the U.S. in the next five years and those that do survive will cater only to high income consumers.  We can see from the number of closed stores in our malls that the same pattern is being repeated in Canada.

When Should the Holiday Shopping Season Start?

By Randall Orser | Budget , Employees , holiday season , marketing strategy , Retail , Small Business

There is no specific date when retailers should start their Christmas Holiday selling season, but customers would argue that it starts earlier every year.  Following consumer push back the Christmas retail season usually starts after Remembrance Day here in Canada, that’s unless you shop at Costco!  

Retailers who start their Christmas selling program too early, both in-store and on-line often find that customers are irritated by being bombarded with Christmas advertising, merchandise and songs in November and they are turned off of holiday shopping.  Hiring staff too early can be costly for a retailer, if there are not enough sales to support the extra staff and putting out Christmas inventory too early can be a waste of valuable retail space if it is not selling. 

When it comes to Holiday Season discounts and sales which are appearing earlier and earlier each year it is important to put a lot of thought into the products or services that you want to discount.  It really depends upon your business and your market, but these considerations apply to most retailers.

  • If the items are appropriate for the time of year, you don’t want to be selling summer season items in winter.
  • If the items are appropriate for your location – there is no point in trying to sell mitts and scarves in somewhere like Florida or Southern California, they need to be sold in colder climates.
  • Timing – whether your customers will have money to buy early in the season or they are most likely to spend when they get their Christmas bonuses.  You could consider a layaway plan for larger ticket items so they can be paid for over a number of weeks.
  • What you want to have in stock for after Christmas sales when people have more time to shop and likely have more cash and gift cards to spend.
  • Following what other retailers in your industry do if it is a good decision for your business.  It is always a good idea to know what your competition is doing but don’t start your holiday sales earlier because they do if it does not make business sense for you.

Starting your Holiday discounting too early although beneficial to some customers to others it is confusing.  Two months of constant big sales makes it difficult for them to know when to buy to get the best deal, it can also sap any sense of urgency and deter them from making major purchases on Black Friday and Cyber Monday.

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