By Lisa Breault
In the past six weeks, the world has been flipped upside down. Thousands of people in British Columbia have been laid off and businesses have been forced to close their doors. This has resulted in a record number of British Columbians currently facing unemployment.
Whether you have already been laid off or fear that you might be in the coming weeks, it’s important to be realistic and have a plan for the worst-case scenario.
As a licensed insolvency trustee and registered insolvency counsellor, I’ve put together my top five tips and to-dos if you’ve been laid off:
1. Don’t panic
It is a frightening prospect to unexpectedly lose your source of income, especially during these uncertain times. When faced with this situation, it’s easy to panic. You may be worried about how you are going to pay your bills, rent, or purchase essential items.
The most important thing to do is stay calm. Making quick decisions while you are in a state of stress can often lead to consequences later.
An example of this would be impulse purchasing. Sometimes it feels good to “treat” yourself to something nice in order to take your mind off the stress. During these times, it’s important to avoid using your cash flow for unnecessary purchases.
Another example would be cashing in your registered retirement savings plan in order to generate cash flow. While this may seem like an easy fix, it can have unintended tax consequences in the future. Remember, any money that you take out of your RRSP has to be included in your income for the tax year. Not only can this result in an increased amount owing in income taxes, but it can also affect future benefits as well, such as GST credits, guaranteed income supplement amounts, and child tax benefits in future years.
2. Find out which government programs and assistance you might be eligible for
Both the federal and provincial governments have programs available for individuals who have been laid off due to COVID-19.
Here is a summary of some of the federal programs that may be available to you:
Canada Emergency Response Benefit (CERB)
The CERB offers income support for up to 16 weeks to those who lose pay due to the pandemic. It will cover Canadians who lose their jobs, get sick, are under quarantine, or have to stay home because of school closures.
If you qualify for the CERB, the government will provide up to $2,000 per month. However, it’s important to be aware that all the money you receive from the CERB is a taxable benefit. This will have to be declared as income on your 2020 tax return and you will have to pay taxes on this money, so don’t forget to budget for this.
EI Sickness Benefit
The EI Sickness Benefit is an existing program that has been modified in light of COVID-19. It is administered by Service Canada and is targeted to workers who are unable to work due to illness, injury, or quarantine (including self-isolation).
Canada Child Benefit
The government will provide an extra $300 per child through the Canada Child Benefit (CCB) for 2019-20. This will look like approximately $550 more for the average Canadian family. This benefit will be delivered as part of the scheduled CCB payment in May.
This benefit will provide $1,250 per month for eligible students or $1,750 per month for eligible students with dependents or disabilities. The CESB is available from May to August 2020. If you’re a student who has a job, but are making less than $1,000 per month, you are also able to qualify for this benefit. Eligible students can also collect this benefit alongside the Canadian Student Service Grant.
These are just a few of the major government benefits available for Canadians during this time. The team at Grant Thornton Limited has also compiled a full and complete list of programs and benefits that is updated regularly as more program details are unveiled.
3. Talk to your bank
There are many programs available right now to help you deal with your mortgage payments, student loan payments, and possibly credit card payments as well. Canada student loans have offered an extended interest-relief program and the major Canadian banks are working with homeowners to provide mortgage support and deferrals. Additionally, B.C. residents are also able to receive support if you’re a renter worried about a potential eviction, with some exceptions.
To learn more about the relief programs your financial institution has available, you should visit your bank’s COVID-19 responses page.
4. Re-evaluate your budget
Now is the time to really sit down and assess your wants versus your needs. As mentioned earlier, it’s really important to avoid unnecessary spending during this time. While this situation will not last forever, the financial impact of this pandemic could have long-term consequences. It’s important to be realistic and to avoid using credit to cover expenses as much as possible.
5. Update your résumé
Just as companies are re-evaluating the way they are doing business, it may be a good time for you to re-evaluate your future. Perhaps you have been thinking about changing careers for a while and just haven’t had the time to actually make the change. Believe it or not, some businesses have been able to adapt to this new “normal” very easily, which may provide opportunities that were not formerly available. Keep an eye on job postings, and you never know, your dream job may actually be attainable right now or in the not so distant future.
Throughout these unprecedented times no matter what actions you take or don’t take, it is especially important to do your research and seek advice from licensed professionals so you are aware of every potential scenario when it comes to your debt and finances.