Pattie Lovett-Reid: Tackling personal debt during a crisis
It feels like overnight the Canadian mindset about money has shifted. The economic and financial fallout of COVID-19 has touched just about everyone to varying degrees.
Whether they are infected or not, financial stress will be a symptom of the pandemic for many Canadians.
It was only back in January when the Canadian Payroll Association shared research that revealed the capacity to manage a financial setback, like missing a paycheque, is the biggest factor that supports financial wellness. Today, so many Canadians are missing their paycheque, so you can appreciate the lack of financial wellness is growing.
With so many Canadians out of work and the Canada Emergency Response Benefit (CERB) kicking in, now is the time to take immediate action to help reduce your family's financial fallout. This is the time to control what you can at a time when everything around you feels out of control.
Here are some considerations.
1. Contact your creditors in writing to create a paper trail. Highlight your situation and work together to devise your plan. That may mean partial payments, interest only payments, maybe even missing a payment. And discuss the knock-on effect to your credit rating. Your credit rating may not matter to you now, but it could down the road. You will likely want the good financial standing you had before the crisis reinstated after it’s over.
2. Access Employment Insurance and the CERB.
3. Consider a line of credit. Credit Canada never recommends indebted clients use a line of credit to make ends meet. But these are unusual times. If you struggling to make ends meet and running out of cash, a line of credit or home equity line of credit (HELOC) is a far better option than getting a payday loan or using high-interest credit cards.
4. Budgets matter. This is where you get razor-sharp on how much income you have coming in and what you absolutely need to spend your money on. Avoid panic spending and hoarding. Now more than ever you need to practice sound money management and budgeting.
You may never have needed the help of a debt professional before; however, that was then and this is now. Credit counselling companies like MNP Ltd. and Credit Canada are financial crisis first responders. They have the expertise to know what creditors are doing to help their clients who can't make payments, and what resources the government has to offer.
There is no shame in reaching out for help. In fact, the sooner you take immediate action, the more likely you are to reduce the financial fallout from this crisis.