How to spend your CERB cheque wisely?
By this time, most Canadians affected by COVID-19 should have applied for and even received their CERB cheques. Apart from that, the Canadian and provincial govts also provided additional financial support like onetime special payment through GST Tax Credit for low and modest income families, increased Canada Child Benefit and in some provinces, rent support.
If you haven’t already done so, check out available resources here.
On top of that, this is also tax time and many Canadians receive their tax refund during this period.
Before spending all the money that came in, take some time to create or tweak your budget to reflect your current situation. Sort out what is essential for you right now, and what is discretionary. Similarly, prioritize your bills and loan payments. Some payments are more important and urgent, and some may be deferred. For example, a mortgage or rent payment will likely be the most important payment for many people.
Learn more about budgeting here- https://www.finjoy.ca/financial-education/budgeting/
Below is a guide on how to spend your CERB and govt support cheques. It is broken down into three segments in descending order of importance. However, everybody’s circumstances are different, so adjust it according to your own unique situation.
Meet your immediate needs
If you are on shaky financial grounds, start with these-
Buy essentials – first and foremost, stock up on essentials like groceries, medicines, household items, pet supplies etc. You do not have to hoard but buy enough to last you at least 2 weeks. Buying in bulk usually saves you money, and at this time it will also ensure that you are able to maintain social distancing.
Pay rent or mortgage- Most provinces have halted evictions, but you still have to pay your mortgage and rent eventually. Since this is usually the biggest chunk of your budget, pay full or even partial rent or mortgage before they snowball into bigger payments later.
Pay your other bills- This is a good time to check if you can trim your phone and internet bills by downgrading to a cheaper plan. Similarly, if you are not using your car now, check if you can suspend or reduce your insurance coverage. Some insurance companies are providing one-time rebates to customers who are not using their vehicles. Contact your insurance provider and see if this is available to you.
Put towards emergency savings- Use money left over to bolster your emergency fund. We still don’t know how long the effects of COVID-19 pandemic will linger in the economy and it is good to be prepared.
Learn more about emergency funds here-
https://www.finjoy.ca/blog/do-you-have-an-emergency-fund/Make your loan payments- If you deferred your loan payments, you should make those payments now if you can. Deferment often results in extra interest and you may end up paying more if you keep postponing your payments.
Plan for your future
Keep your short- and long-term financial goals in sight and keep working towards them-
Save for your short-term goals – If you had plans like saving for a wedding, down payment or higher education before the pandemic, remember that those plans are still feasible once the pandemic is over. A TFSA may be an ideal place for saving for short-term goals since there are no penalties for withdrawal.
Put towards retirement- If you have at least 3 months expenses saved in your emergency fund, contribute to your RRSP or any other retirement funds. If you do not have one yet, and you are afraid to go out, check out online providers like Tangerine or Wealthsimple where you can open investment accounts from the safety of your home.
Pay off your debts – Finally, as part of planning for future, pay off your high interest debts. You will not only save on interest, but this may also improve your credit.
Read more about Debt Management here- https://www.finjoy.ca/financial-education/debt-management/
Put aside some money for 2021 tax season – The CERB benefit is taxable. So, it may be a good idea to put some money aside for next year’s taxes.
Good to have
If you are in a good financial situation, consider the following ways to spend your extra money-
Invest – The pandemic has caused havoc in the stock market. The Feds have reduced interest rates and market prices are low but still volatile. If you have discretionary income and have a fair bit of financial knowledge, consider opening a low fee diversified portfolio to start investing.
Treat Yourself- If the pandemic and social distancing have you down, indulge yourself. Order a takeout, rent a movie or even buy online classes for something that you are interested in.
Donate- Just like individuals, many organizations that run on charity have been affected due to the pandemic. Donate to your local food bank or various shelters. If you want to show gratitude for our healthcare workers, consider making donations to your local hospitals. You can also donate to causes that you support and believe in.
Read our previous blog posts here – https://www.finjoy.ca/blog/
