How to protect your paycheck from a pandemic


Why you should think about your financial habits in the event of a pandemic

Whether you are an entrepreneur or a full-time or part-time employee, the effects of COVID-19 have hit many people hard financially. As Canada prepares to reopen the economy, people are still concerned about the long term effect on their finances.

Millions of Canadians have lost their jobs. Statistics Canada Monthly Employment Survey found that from February to April, 5.5 million workers were affected. This included an increase in unemployment of 3 million and an increase in COVID-related work absences of 2.5 million. In June, employment increased by nearly a million, building on the 290,000 jobs created in May. Overall, employment is picking up, which is good news for job seekers and reassuring for those in employment, but it is not yet clear. If you have a job, what can you do to protect your finances from a pandemic just in case?

Create an emergency fund

“[The pandemic] has been a much needed wake-up call to many people in terms of their financial situation, ”said Darryl Brown, Chartered Financial Analyst and independent investment consultant at You & Your Financial. He says that if people are not thinking of setting aside savings, they should take the opportunity to start a emergency fund.

The standard advice is to save three to six months in your emergency fund, but this can vary. If you are able to apply for Employment Insurance (EI), you might choose to save less because EI will cover part of your living expenses. If you’re not on EI, you’d better save at least six months of expenses. It’s best to save as much as possible due to the uncertainty surrounding the duration of the impacts of COVID and its long-term effects on the economy.

Re-evaluate your investment strategy

“People tend to think of their investments and savings as an island,” says Brown. “They put their money on the stock market and hope it will increase. This is how we were trained to think about it. He says that with COVID-19, if you feel there has been a change in your job security, it could mean a change in the way you think about investing. “Maybe you need a less aggressive portfolio or maybe you need more in terms of savings or spending.” This could mean shifting your asset mix to more bonds and fixed income versus equity funds.

People are trying to survive right now, says Brown, but he says when you have the mental space and feel comfortable, take the time to plan your life. goals and objectives of your financial habits in the event of a pandemic. “Take stock if there’s a change and how you might be feeling,” he says, then use it to see if you need to adjust your investment strategy.

Pay off the debt

Canadians are deeply in debt, and it has increased it. Our debt-to-income ratio is now 176.9% from June 2020. So if you have debts, try to pay them off as quickly as possible. Keep paying for things like mortgages and car loans because you need shelter and a way to get to work and shop for groceries. Next, look at any remaining debt and start with the one with the highest interest rates, like credit cards. Put some extra money to pay it off, then move on to the next debt. While you are doing this, keep making minimum payments on other debts so you don’t miss any payments and lower your credit score.

If you don’t have the extra money to spend on paying off your debt, consider moving the debt to a line of credit or credit card with a lower initial interest rate, so you have to pay less. over a period of time. Do this if you can pay off the debt on the original offer. Some credit cards charge transfer fees, and it’s usually a percentage of the balance. The fee might be worth it if you end up paying less or if you can apply for a card with a 0% transfer fee.


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