Managing your budget
The first thought that often comes to mind is “How am I going to manage without a source of income?”. If you’ve been using a budget you should have an understanding of your monthly expenses, but if not, it’s essential that you create one to manage your finances. This will help to identify expenses that can be deferred, reduced, or eliminated. Debt management strategies may be able to reduce your monthly payments, especially if you have high interest debt. The Canada Mortgage and Housing Corporation (CMHC) is providing increased flexibility for homeowners facing financial difficulties by allowing them to defer mortgage payments on residential CMHC-insured mortgage loans. These measures also allow for the deferral of payments on mortgages held with Canada’s largest banks for up to 6 months. IG Wealth Management has taken steps to work with mortgage clients who are facing financial difficulties that could include payment deferrals or capitalization of payments.
Tax filing deadline change
In response to COVID-19, the Federal Government has also announced tax measures, and other financial support for individuals and businesses. Many of these measures will be of assistance to individuals who have lost their jobs. The Federal Government has extended the tax filing deadlines and tax payment dates for individuals in response to COVID-19. The deadline for filing 2019 personal income tax returns has been postponed to June 1, 2020. However, if you are expecting a refund or expect to receive benefits under the GST Credit or the Canada Child Benefit, do not delay in filing your return. The deadline for paying any balance owing on your 2019 taxes or 2020 installment payments is deferred until September 1, 2020. Additional measures included enhancements to the Goods and Service Tax credit, the Canada Child Benefit, as well as a six-month interest-free moratorium on the repayment of Canada Student Loans for those in the process of repaying them.
Sources of income
Now that you are aware of options to manage your expenses, you will want to determine how to cover them. The following are options that may be available to you:
Employment Insurance (EI) regular benefits can provide up to $573/week for individuals who meet the eligibility requirements. EI sickness benefits, for individuals who are unable to work due to illness, injury or quarantine, of up to $573/week are payable for a maximum of 15 weeks.
The Federal Government also introduced the Canada Emergency Response Benefit (CERB) which will provide a taxable benefit of $2,000 per month for up to 4 months for workers who lose their income as a result of COVID-19. This benefit will apply to wage earners, as well as contract workers and self-employed individuals who would not otherwise qualify for EI. The CERB will provide income support to:
- Individuals who have lost their job, are sick, quarantined, or taking care of someone who is sick with COVID-19
- Working parents who must stay home without pay to care for children who are sick or at home because of school and daycare closures
- Workers who are still employed but are not receiving income because of disruptions to their work situation due to COVID-19, and
- Self-employed individuals who are not earning any income as a result of COVID-19.
A severance payment is another source that can not only help meet your current needs, but if used strategically can also be used to supplement your retirement plan. You may be able to rollover a portion of the severance payment to a Registered Retirement Savings Plan (RRSP) or spread the payment over multiple years to minimize taxation.
Other options that can be used as emergency funds include: Tax-Free Savings Accounts (TFSAs), Money Market Funds, lines of credit, loans or other non-registered investments.
You will also have some critical decisions to make on other benefits that don’t necessarily affect your immediate cashflow concerns. These could include your pension, health and dental benefits, and group life and disability insurance. Your IG Wealth Management Consultant can assist you in creating a plan that addresses both your current situation and your financial future.