Steps for Managing Cash Flow in a Crisis
Household cash flow is a simple calculation: all amounts coming in less all amounts going out. However, the sudden and devastating impact of COVID-19 on the economy may have drastically altered the income side of this equation.
The Following Steps Can Help You Manage Your Cash Outflows:
1. Cancel Most Pre-Authorized Withdrawals in order to have 100% control over cash outflows. Note, however, that there are certain payments, like your mortgage and utilities, that you may still have to make. (Much more on that below.)
2. Temporarily Cancel Automatic Transfers to investment accounts to conserve cash. Automatic transfers to savings accounts can continue, depending on your goals. For example, if you were saving for a vacation, you could suspend those transfers. If you normally sweep excess cash into a high interest savings account to hold for a short period of time (a few days or weeks) before your bills are due, you can continue to do so long as the funds are in an account that you have access to at any time.
3. Examine your monthly cash outflows and categorize each expense as either a need or a want. All discretionary expenses/wants (nice-to-haves) by definition can be eliminated for now (some may not even be available at the moment). Don't forget to cancel subscription services you don't need.
4. Focus on Needs, the Must-Haves for Survival, and Triage What to Pay. Prioritize paying for any needs that you can't defer, such as groceries and household supplies, including medication. (Cooking from scratch is less expensive than food delivery or takeout.) Speak to your insurer to see if you can reduce your insurance premiums by increasing your deductible or bundling your different insurance needs (contents/renters, automobile, health, life, disability…)
5. If like many Canadians, your mortgage payment is your largest fixed, monthly payment, talk to your mortgage lender about potential options for relief. If you defer your mortgage payment, interest will still continue to accrue. So if you can find a way to make the mortgage payments now as scheduled, it will cost you less in the long run.
6. If You're Having Trouble Paying Your Rent, Try to Work With Your Landlord to come up with alternative arrangements, such as a deferral and payment plan.
7. Check to See if Your Municipality Can Waive Late Payment Penalties for Property Tax and Utilities. Check with your municipality to see if relief, such as a temporary grace period, is an option. However, you may still need to make other utility payments on time, such as gas and electricity, to avoid penalties and interest.
8. Review Your Phone, Internet and Cable Package (if you haven't already cut the cord), to see if you can reduce your monthly payment by switching plans, cutting services or bundling. Check with your service provider to see if there's an opportunity for relief, or what measures they've put in place to help customers.
9. If You Have Credit Card Debt, Reach Out to Your Bank to learn about potential payment deferral and possibly a reduced interest rate during the deferral period.
10. If You Have Federal Student Loan Debt, You Could Get a Break on Payments and interest for six months. The pause took effect on March 30, 2020 and will last until September 30, 2020. Many provinces have followed suit.
11. The Personal Income Tax Filing Deadline Has Been Deferred until June 1, 2020 and payment due date has been extended to September 1, 2020.
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