Waiting for $2,000 CERB Deposit, Now What?
I believe that the Canadian government has responded very quickly to help financially. Applications opened this morning for the Canadian Emergency Response Benefit (CERB). This benefit is to support self-employed individuals and others that do not qualify for Employment Insurance benefits (EI).
Here is a link with some details on who is eligible and how to apply: https://www.canada.ca/en/revenue-agency/services/benefits/apply-for-cerb-with-cra.html
If you are set up for direct deposit, the communication has been that this money will hit your account in as little as three days. Before it hits, you need to have a plan for it. For many of you, getting paid once/month is a huge shift to how often you were paid in the past. A month is a log time to go between being paid so having a plan will be key. Chances are good that the amount is also very different from what you normally earn or pay yourself from your business. Whether it is more, or less, it is still critical to have a plan.
Here are some key steps to setting up a plan:
1. Lay out all of you monthly financial obligations.
a. If you already have a monthly budget, make a copy of it and adjust anything that has changed based on your current needs (less $ on gas is a typical example).
b. If you do not have a monthly budget, this is a great time to start. There is no wrong way to do this, paper and pen, excel, google sheets or in a fancy notebook, do what works for you. Look back at your recent spending by checking bank and credit card transactions. Some items that are often forgotten are monthly and annual subscriptions (Netflix, Spotify, Amazon Prime etc.)
2. Crunch the numbers. Look at your monthly household income and minus all your expenses. When calculating your monthly income, be sure to include any other government benefits, like Child Tax Credit. This will give you a clear picture if you will be short each month or if you will have a surplus.
3. If you have a shortage, review your monthly expenses and see where they may be opportunities for you to cut back (this doesn’t hurt to do if you have a surplus either). Here are some areas where I typically see opportunities to cut back.
a. Communications bills (Rogers, Bell etc.): Review your current services and see if there is an opportunity for you to reduce any of them. Chances are good right now that you are staying home more, so maybe you can reduce your cell phone data. If you still have cable, maybe this is a great time to cut the cord. Many of the larger communications companies allow you to communicate with them over FB messenger so you don’t have to spend a lot of time on the phone. This is especially wonderful if you have little ones at home that make long phone calls difficult.
b. Debt Payments: Many banks are reducing interest rates or pausing payments. If you have credit card debt and are not aware of your credit card company having anything in place, contact them and see how they are able to help you.
c. Car/Tenant/Homeowners insurance: Maybe this is something you have been putting off. Now is a great opportunity to have your insurance re-quoted to see if you can save. Personally, we had not done this in quite some time and were able to save about $60/month by putting in a little effort.
d. Misc spending: this used to be the biggest offender for us. I recently crunched our numbers. When I looked at our spending prior to losing my job in 2017 and compare it to 2020 spending, this number has gone down a whopping 79%! How you may ask? By paying attention, being very focused on reducing this number and being intentional with every dollar. Being intentional is the key here. Where can you cutback in this category?
e. Contact mortgage/loan lending companies: If have reduced your expenses using some of the above tips, and you are still short. It’s time to contact your lenders to see what your options are. Lenders are helping their clients by deferring mortgage and loan payments if you have lost your income. Be sure to take the time to fully understand. In most cases the interest will continue to be added each month which will increase the cost of the loan. Be sure to ask questions if something is not clear.
4. If you have a surplus-congratulations! You have an opportunity to put the surplus to good use. My #1 recommendation is to:
a. Start or add to your Emergency Savings. The need to have money saved to help you when life happens has been highlighted in recent weeks. If you have money saved and something out of your control happens, it will give you peace of mind. I do not think that money that is saved for a rainy day should not be invested. Yes, it has the potential for more growth than in a savings account, it also has the potential to put a big dent in your money. I recommend a savings account that has a higher interest rate. We personally use Tangerine to hold our emergency savings. Goal: 3-6 months of your expenses saved. When calculating what your monthly expenses are, think about your basic monthly expenses. Think about what you would be able to cut if you were in a situation where you needed to live off of your savings.
b. Start or add to Sinking Funds. Sinking funds are accounts where you save regularly each month, or each pay period for larger expenses. If you don’t currently have any in place and your emergency fund is covered, starting up sinking funds is the next step. Having them in place will allow you to have less need to use your emergency fund. A few great Sinking Funds to start with are Car Repair, Home Maintenance and for items you pay for annually like car/home insurance or holiday shopping. We personally use Tangerine for our sinking funds. We get a higher interest rate than many banks and we also get the added bonus of being able to give the accounts custom names so we can easily see what each account is for. We have a separate account for each purpose. You could also opt for one account and track the money using a spreadsheet or notepad. You must find what works for you.
c. Support local businesses. Yes, this seems crazy that I am recommending you spend the money. If you are in the situation where you have a safety net in place in the form of an emergency savings account and are in a position where you have a surplus each month you have a wonderful opportunity to be able to help a small business that could really benefit from your purchase. Every little bit helps.
The most important thing for you to do is take time to focus on taking care of yourself and your family. There is so much information out there and you can end up down a rabbit hole if you’re not careful. Personally, I have been focusing on limiting my time on social media and getting creative to stay connected with friends and loved ones.
On Monday April 13th, I am hosting a virtual Money Mastery workshop where I will give you the tools and support you through setting up a personalized budget. To register use the link below:
https://app.acuityscheduling.com/schedule.php?owner=17480698&appointmentType=13477762
If you have any questions, or want to learn more about One on One Financial Coaching please email sherry@moneymindsetfc.com or use the link to book a free call at the bottom of my website.
Hope you are staying safe and healthy.
Sherry
