SYDNEY, N.S. — Lost and reduced income and the resulting budget crunch during the current pandemic has become an unfortunate reality for many as businesses temporarily close and reduce their hours and workforces.
Drastic measures for those impacted are not the answer though, according to a licensed insolvency trustee. Instead, the answer lies in calm and careful planning.
Len Shaw from the Sydney BDO Canada office suggests an emergency budget, which will not be your forever budget, to guide spending over the next six to 12 weeks as one step to take.
“Now that a lot of people are on reduced income it's important to look at the budget and get back to basics,” Shaw said from his temporary home-based office.
“Now that they have a reduced income they need to look at where they can scale back and reduce expenses. That's your rent or mortgage, utilities, groceries to see if your budget can balance with those things.”
If you have debt, he said, it is more important now than ever to write down on a list of some sort so you know your monthly payments and if you can fit them into that emergency budget.
Avoiding high-interest loans such as payday and online loans is another important tip.
If you take on debt as bridge financing to get you through this period, it is important to have a plan in place to pay it back, he said.
If you have cash savings or some sort of emergency fund, it might be time to use it.
You should, however, avoid cashing in on any retirement savings at this time.
"Those investments are down 20-30 per cent, so it is important if you can avoid cashing those out. It is always good advice to avoid that because you are going to get hit twice. Right now, that is just a paper loss but as soon as you cash it out, it is an actual loss. You are not giving the investment any possibility of recovering or going back up.”
Shaw said the federal and provincial governments have each stepped up with short term measures for individuals and businesses to consider during these times.
Federal government actions include an increase in the child tax benefit beginning in May and added GST payments for individuals and families.
Improved access to employment insurance payments is another helpful federal measure noted.
A $55 billion federal aid package also improves access to sick EI benefits and offers assistance to small business owners impacted by the pandemic.
The government is also increasing access for businesses to credit facilities like the Business Development Bank of Canada and Export Development.
Business owners should check their insurance documents for business interruption coverage.
Shaw also noted the banks are willing to work with mortgage holders on a case-by-case basis and that Nova Scotia Power has stated people will not be cut off during the pandemic.
If after all these measures and government aids you still can’t fit debt into an emergency budget, you can seek options through licensed insolvency trustees.
Shaw said consumer proposals that consolidate debt, stop interest and offer payment plans at a reduced or fraction of debt are an option. Bankruptcy is a more drastic measure that’s also available.
The federal government through the office of Superintendent of Bankruptcy has granted temporary measures during the pandemic that allow the insolvency system to continue to operate and licensed insolvency trustees to do their jobs remotely.
He said they are able to meet with people through video conferencing and sign and file proposal documents with the government during the pandemic.
“We are telling people to ‘stay calm, we'll get through this.’ There's always a way to fix a financial problem.”
