Research Study Affects of Covid-19 on Finances
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The recent weeks have left us all feeling like we are in a bit of a blender. Our plans have changed, we’ve implemented social distancing, shifted to working from home and more than ever we are aware of the dangers of the Coronavirus. But at Bromwich+Smith, through a rapid increase in calls and conversations with clients, we knew that this was not just a health crisis; it was an economic one. We decided we needed to get a better understanding of the impact the COVID-19 pandemic has had on the finances in Canadian households. We partnered with Leger Research to survey the financial perspectives of Canadians. On March 23, 2020 we undertook a 24 hour survey of 750 residents in Alberta, British Columbia and Ontario.
To see the detailed survey results click here.
The survey found Canadian families and individuals are already falling behind on personal finances during the COVID-19 crisis. 49% of Albertans have experienced an immediate income reduction. 24% of Alberta households are already behind on payments with credit cards, utilities and cell phone bills being the first to lag behind. The survey finds 51% of Albertans say they are worried about falling behind at some point in the future.
The survey also found in Ontario 49% of families have experienced an income reduction and 19% are behind on payments. In British Columbia, 51% are experiencing lower incomes and 19% are already behind on monthly bills.
“The results are quite staggering really. Of course, we get a sense of what is happening when we read the news, but the survey results make it far more real having interviewed 750 people across B.C., Alberta and Ontario,” says David de Lange, Senior Vice President of Leger Research.
Some of our key findings in the research were:
- Almost half of households in Ontario, Alberta and British Columbia have experienced income reduction as a result of COVID-19. Hardest hit are those aged 18 to 34.
- In Alberta, Calgary is the hardest hit compared with the rest of the province. In Ontario, the southwest of the province and the GTA are bearing the brunt of income reductions, while in British Columbia areas outside of Greater Vancouver have a higher percentage of those whose income has been impacted.
- For those who experience financial trouble, 39% indicated they will rely on government assistance, while 23% do not know what they will do.
- Not all sectors are impacted to the same degree. Hardest hit are those providing personal specialized services, such as taxi drivers, hairdressers, cooks, etc. where 80% have experienced income reduction. Students and semi-skilled workers are also among those hardest hit (74%). Those in the science and technology sector, and those who are retired or on government assistance are least impacted.
- One in five households are behind in payments. Among those who are behind in payments, almost half are worried about falling further behind. For those who are currently not falling behind in their payments almost half are worried this is yet to come.
- For those who are behind on payments, almost two-thirds are behind on credit card payments.
- Households that earn under $60,000 per year are more likely to fall behind on mortgage payments than those who make above $60,000 (43% vs 25%).
How do Canadians adjust to unexpected reduction or loss of income? How do families continue to make vital payments while still having enough cash to cover essentials like rent, utilities and groceries?
The study revealed that most Canadians will first reach for federal and provincial government assistance (42%). 23% suggested they that they “don’t know what to do” nor what action to take immediately.
“During these unprecedented times, it is important that Canadians know it is okay to reach out to professionals for financial advice. There is no shame in struggling with finances – we are all in this together”, said Jasmine Marra, Vice President at Bromwich+Smith. “If you are unable to pay your debts as they become due, Canadians need to reach out to access government programs offered, call their mortgage lender to see if a deferral could work for them or call a licensed insolvency trustee to understand if restructuring debts makes sense for their current state.”
While the current situation seems almost unbearable with no end in site, we wanted to make sure we shared our top three tips to make in through this difficult financial crisis:
- Know your Numbers. If you already have a budget and net worth sheet -congratulations! In light of the recent changed, it’s time to review those numbers now. You maybe one of the 49% of Canadians experiencing income reduction and this will affect your budget. In the last three weeks, there is no doubt that your income and expenses have changed. Knowing where you are now is critical for the next step. If you do not have or use a budget, now is the time to start! In order for the GPS to give you a route, not only do you need the destination address but, knowing the start location is just as important. The same is true for your money and finances. In order to get to where you want to be, you need to know where you are now. If you don’t have a budget planner template you can use the free one from our site. Once you know your numbers you can move to step 2 with confidence.
- Emergency Response Planning. All large corporations and governments have an ERP in place at the start of each year, when things are calm, hopeful and rational. One of the biggest challenges in times of crisis is our emotional stability. We can feel anxious, stressed and frightened even. These feelings stem from not being in control. Many things are, in fact, out of control during this pandemic; whether we will have a job or not, whether we can go into work or work from home, the limit on items in store etc. Putting an ERP in place, is how we take control back at least of our financial situation. You come up with a worst case scenario (or two or three) and write out a plan of attack for each scenario. It may sound something like this: If we both lose our jobs, how will cut or reduce our expenses? What benefits can we qualify for and how do we apply for them? Can we create another income stream while we are off? Do we have an emergency fund? How long will the emergency fund last us? Do we know who can help us further? Once you have a plan written out, you have some peace of mind and you can execute your plan when necessary.
- Seek out the right professionals. In order to know exactly what steps you might take in your ERP, it is a good idea to seek out professionals in the financial space. There is absolutely no shame, now during a pandemic, or ever, in seeking out assistance from the right professionals. That is their job. They are here to help guide you, support you and get you through these times. You may want to reach out to see what government programs might be available for you. If you are a homeowner, contact your mortgage lender. Not only do you need to know if you qualify for a mortgage payment deferral, but, more importantly, what is the total cost of this option. A deferral is not a free pass, it is postponing payment to a later date and that usually comes with compounding interest. Get the facts and full story from your lender before jumping on to this solution. Speak to a Certified Financial Planner about your investment strategy and your financial plan. What, if anything, needs to be adjusted given your current situation? What is your timeline and how are you positioned for retirement and other financial goals? Finally, 94% of Canadians who are already late in payments are worried about falling behind on payments. If you are struggling to meet your monthly obligations or concerned you may soon struggle with this, the best option for you is to speak to a Licensed Insolvency Trustee like Bromwich+Smith. A Licensed Insolvency Trustee (LIT) is the only federally legislated professional that can legally restructure debts.
Licenced Insolvency Trustees, Bromwich+Smith have debt relief specialists available to offer debt advice and debt restructuring entirely from the comfort of your own home. Now offering video appointments with clients, Bromwich+Smith’s Debt Relief Specialists are available for initial free, no obligation, confidential consultation by phone at 1-855-884-9243 or via www.bromwichandsmith.com.
By Taz Rajan Community Engagement Partner at Bromwich+Smith
Taz has been in the finance industry for nearly 2 decades and has always been passionate about education and empowerment. Having declared bankruptcy herself, she intimately understands the shame, stigma surrounding matters of debt as well as the joy and relief that comes from restructuring. Taz actively works to normalize the conversation of debt through blogs, media interviews, webinars, lunch & learns and through building relationship.