Paying bills when you lose your job
If you are part of the millions of Canadians that lost their jobs because of the Coronavirus pandemic, your revenue flow could have slowed or simply stop ! However, bills never cease to arrive.
To manage your finances until the crisis passes and be back at work, a plan is in order. Here are a few tips on how to pay your bills and when you could differ their payment.
Where to Turn to for Money
Credit Cards
In normal times, the ideal way to handle credit cards is to pay the whole amount each month and avoid often costly interest fees. We are not in normal times.
If you have little money available, paying the minimum amount requested on your credit card bills, for a few months, could be a practical solution. If you have more that one credit card, start using the one with the lowest interest rate. If you reach your credit limit, start using the next. But remember, we are talking about necessities.
You should aim to pay at least the minimum payment due on each card, each month. If it causes a problem, some banks or credit unions allow clients to differ payments while waving the usual penalties. You should check the WEB sites of your credit card issuer to see what kind of help they offer and the way to ask for it. The best time to do it and take the necessary measures is before your next credit card bill arrives, not after.
Debit Cards and Chequing Accounts
The amount you can withdraw at an automated teller is generally limited to the amount that is in your account. However, you can also have a credit margin attached to your account that you can use once your account has reached $0. The amounts of credit margins or overdraft protection is generally low — from $500 to $3,000, for example — and you must reimburse the amount plus interests. But, it is another source of cash in a pinch, and in the present crisis, some banks will increase your credit margin if you ask.
Retirement Funds (RESP and TFSA)
Empty your RRSP before retirement is generally ill advised. However, if it is where most of your savings are, it might be your only solution.
Registered Education Savings Plan
If you have money tied up in a RESP for your children, you can withdraw any amount for any reason. However, you might have to reimburse the government grants deposited in that account.
Prioritizing Bills
If you have more bills that you can pay, it is time to prioritize. Food should be high on your list. Same for lodging, that includes mortgage payments or rent and public utility bills. For food, you will need cash, or use a debit card or a credit card. For lodging and other important expenses, you could require more flexibility.
Rent
If you rent, and foresee having problems to make your next payment, talk to your landlord as soon as possible to see if your can pay later or make a reduced payment. Keep in mind, of course, that your landlord is probably an ordinary person and not a big company. He or she could experience money problems as well.
Mortgage Payments
If your house is mortgaged, talk to your lender. Several banks offer their mortgagees to postpone payments for a given period or offer other means of help. If your mortgage is insured, you could be eligible for other programs that will enable you to differ payments.
Car Loans or Rental
In the same way, if you hold a car loan or rent, contact your lender or rental company. Many car dealers and other lenders have programs that will enable you to differ payments for a month or more.
Car Insurance
Some Insurance Companies will allow clients to differ premium payments for a given period without cancelling the coverage. So, check with your insurer (but do not risk being uninsured).
Public Utilities
In the case of gas, hydro, water, telephone or internet bills, check out the provider’s WEB site to see if they offer special payment plans to help you manage your available money. Several public utility companies have voluntarily put programs in place because of unpaid bills, and some governments have imposed it on them.
But before simply stop paying your utility bill, make sure you know the consequences.
Protect your Credit Rating
It is not time to overly think about your credit rating. However, there are certain measures you can take so that it does not take a serious dive.
To start with, try to make at least the minimum payments required on your credit card bills and do it in time for the pay date.
If your mortgage lender accepts to differ or cancel your loan payments, they should not declare it to the credit bureau as late payment. Your lender can also supply a “Declaration indicating you have been victim of a declared or natural catastrophe, that can help protect your credit experience and rating,” according to Experian, one of the three main Credit Rating firms.
When the Crisis will be Behind us
Once the pandemic has passed and you are back at work, you will need to abide by the reimbursement agreements you made with creditors:
Aim to reimburse all accumulated credit card balances, starting with the ones that carry the highest interest rates first.
It might also be a good time to create an emergency fund or to replenish the one you had, and now gone. In general, it is wise to put aside at least three to six months worth of living expenses in a cash account, such as a bank savings account or an investment mutual fund on the monetary market, from which you can withdraw when needed.
We might never see a crisis like the one we went through, let’s hope, but having money on the side can be comforting in good and bad times.