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: