Is COVID-19 hurting your financial situation? Now’s the time to review your finances and take tangible steps to minimize your losses.
7 ways to minimize your financial losses
1. Take advantage of government programs
You could qualify for measures announced by the Government of Canada as part if its COVID-19 Economic Response Plan This link will open in a new window to support workers facing financial losses as a result of the COVID-19 outbreak. You may also be eligible for already existing government programs such as employment insurance or tax credits for low-income individuals.
2. Draw up a balance sheet and review your budget
This is where to start if you’re looking to better manage your finances. A balance sheet is a statement of your current assets and liabilities and can be used to identify current sources of savings and credit. A budget, meanwhile, will show you how much money you’re currently taking in and what you’re spending it on.
3. Reduce your expenses
Immediately cut spending on items that seem non-essential and put off spending on other items where you can. You may find some of the tips in the Guide 99 trucs pour épargner sans trop se priver(pdf - 6 MB)This link will open in a new windowUpdated on 24 May 2017 (in French only) helpful.
4. Take advantage of payment flexibilities
Desjardins Group, banks, insurers, businesses, municipalities and governments are offering flexibilities for people who are having a hard time making payments on time. Check with the suppliers and service providers identified in your budget.
5. Automobile insurance: ask for a discount
Let your insurer know right away about any changes in your driving habits. If you’ve lost your job, are working from home, or are logging fewer business kilometres than before, you could qualify for a discount on your automobile insurance premiums. Conversely, if you intend to use your car for any business activities, find out from your insurer what types of coverage are available.
6. Use credit properly
If you have to use credit to meet your most essential needs, choose the best credit tool available. Take time to compare the current rates and repayment terms of your sources of credit. Give preference to the one with the lowest interest rate and limit your spending. Even with flexibilities, credit is still debt that will have to be repaid.
7. Don’t fall prey to fraudsters
Fraudsters are adapting to current circumstances and may use COVID as a lure to trap you in their net. Be on your guard: When somebody approaches you with an offer, do your homework before responding. Offers that sound too good to be true should raise red flags. Exercise caution and refer to the section of our website on COVID-19-related fraud for more information on the various schemes used by fraudsters.
Are you thinking of withdrawing money from your RRSP?
If you’re in a bind, you may be tempted to withdraw money invested in your RRSP. Before you do this, there are a number of factors to consider, including:
- Whether it is more advantageous to use money available in a TFSA or outside of a registered plan
- The impact of the withdrawal on amounts you may receive under government programs
- Your overall financial situation, including the sources of credit available to you
- The kind of investment: for example, some investments must be held for a specific amount of time for you to benefit from principal protection guarantees (e.g., segregated fundsA segregated fund is a fund issued by insurers. It is similar to a mutual fund, but has additional guarantees. For example, capital may be reimbursed in the event of death, even if your investments have declined in value. and principal-protected notesA principal-protected note is an investment usually guaranteed by a financial institution. It does not necessarily carry a fixed interest rate. Its rate can fluctuate according to an external factor, such as a stock market index.), some others are not redeemable before maturity (non-redeemable guaranteed investment certificates), and yet others may have fallen significantly in value (most equities)
- Your retirement goals and your ability to start saving again after the pandemic is over
- Potential back-end fees: some investments charge high fees if you don’t hold them for a certain amount of time; others charge fixed fees to redeem your holdings; and so forth
- The fact that the withdrawn amount will be added to your taxable income for the current year and that taxes will be withheld at source
- The fact that you won’t be able to repay the amount to your RRSP at a later date and will therefore lose RRSP contribution room
To help you evaluate all your options, seek the advice of a financial professional and tax specialist.End of the insight
Redemption fees and the pandemic: Weigh your options
If you encounter financial hardship during the COVID-19 pandemic, there are ways you can get money back out of your mutual funds.
Funds with redemption fees usually require you to pay a fee of up to 6% when you redeem your investment in the fund. These fees decrease annually according to a pre-set schedule, which can be found in the Fund Facts.
However, you normally can redeem up to 10% of the value of your investment every year without paying redemption fees. Refer to the prospectus or Fund Facts, or ask your representative how much you should redeem considering this 10% limit.
If you regularly purchase securities of the same fund, you may be able to redeem the portion you’ve been holding for a certain number of years without paying redemption fees. Ask your representative whether this is an option.
Financial hardship waiver
If you don’t have the option of redeeming a mutual fund with redemption fees, contact your representative. Ask whether the dealer he or she works for – or the fund manager – has set up a program to waive redemption fees for clients experiencing financial hardship or would grant a request to do so on a discretionary basis.
You can also direct the same questions to your investment fund manager using the contact information provided in the Fund Facts.
If they have such a program or are willing to consider your request, you may be asked to prove you’re actually experiencing financial hardship. You will therefore have to gather together all the necessary supporting documents: statement of employment, notices of non-payment, medical bills, etc.