Liz Enriquez, Ambitious Adulting
By Liz Enriquez
Many Canadians were in for a rude awakening when the economy was essentially put on hold in March 2020. Almost overnight, thousands of people lost their jobs and their primary source of income.
If you are still working, consider yourself lucky. The unemployment rate in Canada rose to 13.7 percent in May of 2020 which was the highest jobless rate since comparable data became available in 1976. Without the support of the government, thousands of Canadians would be in dire trouble.
According to Statistics Canada, the average net saving for all Canadian households was $852 in 2018. There are many reasons for this, including debt, emergencies, medical needs, education, lifestyle inflation, low wages, overspending, consumerism, and a list of other potential scenarios. Some of these situations make it extremely difficult to get ahead, but one thing that can help push the needle forward is better financial literacy.
When you learn about the options and strategies for managing your money, you can make financial decisions with more clarity.
Here are four things to do with your finances during the pandemic…
Assess your needs vs wants
Focus on spending money on what you really need and stick to your priorities. While we want to stimulate the economy, a pandemic is not the time to splurge and spend money frivolously. On a blank piece of paper, write down your needs and your wants to help you get clear on your goals.
What you really need is shelter, food, and a way to communicate (phone, internet). Wants are anything like getting your hair or nails done, eating out, buying a new phone or TV, paying for subscription services.
We don’t know how long this pandemic is going to last and how much additional support the government is going to provide so make sure you have a safety net and stash some money away if you can.
Creating a budget
Once you’ve established your needs and your wants, create a budget so you can create a plan, and stick to it. A budget will help you formulate a plan so you can effectively manage your money. Nobody wants to budget because it can be a tedious and time-consuming practice but it’s life-changing. When setting up a budget some of the steps to consider are:
- Carefully and honestly record all your monthly spending no matter how mundane they may seem. There are various apps, budgeting template and software which can be used in order to track your expenses. Try a few different methods until you find one that makes the most sense for you.
- Once you have tracked down all your expenses, you can begin to categorize them into either fixed or variable expenses (needs vs wants). With an understanding of your expenses, you can subtract that from how much money you take home in income every month. You should try to have a monthly budget surplus (amount leftover) by eliminating items from your variable expenses that are unnecessary or unnecessarily expensive.
By understanding your spending habits through a budget, you can create a plan.
“Hide your money”
One of the most effective strategies for saving money is to treat your savings as a bill. Just as you would pay your cell phone bill, utilities, and rent every month without thinking twice about it, pay yourself by automatically transferring a few bucks into your savings account before you order in or spend money on something that is not essential.
Sometimes, it helps to have a savings account at an online institution like EQ Bank, Tangerine, or Simplii because it’s “out of sight, out of mind”. Another perk about online banks is their interest rates. Many online platforms offer competitive savings rates (above 2%) which helps the money in your savings account grow faster and keep up with inflation.
Use a low-interest credit card or a prepaid card
You may find yourself using a credit card or other loans during the pandemic. If possible, stay away from high-interest loans because you could be digging yourself into a big hole that will be very difficult to crawl out of. Instead, try something like the Scotiabank Value® Visa* Card , or the BMO® Preferred Rate Mastercard®*. Both of these have lower interest rates below the typical 19% you see with other cards. Or better yet, try a pre-paid credit card like Koho. Koho is a bit like a chequing account, with the perks of a credit card.
Managing your finances can be stressful under “normal” circumstances. We’re living in the middle of a pandemic and must prepare for different scenarios. One of the best ways to be prepared is to secure your finances. Pay yourself first, set money aside for taxes if you are receiving government support, understand your needs and wants, create a budget, and watch your spending.
For more tips about managing your money, follow Liz at Ambitious Adulting.
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Liz is an adventurer, personal finance mentor, and marketing consultant. After purchasing her first property at age 24, Liz quickly realized how little she knew about home ownership and personal finance. She immersed herself in personal finance blogs, books, and podcasts and now shares her knowledge with other millennials looking to be ambitious adults. When she isn’t writing, Liz loves to travel, explore trails, parks, and wineries.
