Since March 2020, we have watched in disbelief and horror as the economic and public health implications of the COVID-19 pandemic swept across the country. Flights were grounded, stores closed, and many Canadians found themselves out of work.
Unemployment peaked in May of 2020, with roughly 13.7% of Canadians out of work. When you also consider underutilized workers – able to work but unable to secure enough hours – that figure jumps to 17.6%.
Job loss wasn’t the only cause of financial stress during this time. Many Canadians were forced to take days off work to care for family members who were ill or unable to receive regular professional care. Additionally, parents of young children (primarily mothers) were abruptly forced to choose between their jobs and caring for children as we moved to remote schooling.
All this uncertainty had contributed to an increasing sense of dread when it came to our finances. In a July 2020 survey, researchers from FP Canada found that between 25% to 40% of Canadians ranked money as their primary stressor.
As vaccine rates increase and COVID-19 case numbers drop, many Canadians are eager to return to a sense of normalcy – whatever that means now. However, returning to work, school, and in-person social interactions all have profound financial implications. One of the best things we can do now is evaluate our finances considering these changing circumstances. Even if you’ve been fortunate enough to remain fully employed during the COVID-19 pandemic, many people’s priorities have changed.
Today, we’ll discuss how Canadians can sensibly handle their finances in a way that minimizes stress and increases their overall wellbeing.
The Impact of Financial Stress on Personal Wellness
It shouldn’t surprise you to learn that money is one of the primary drivers of stress in our modern life. Even when an individual is comparatively well off, the focus on money doesn’t go away. In many cases, it compounds. If left untreated, this stress can easily cause considerable mental health implications.
In one 2016 study, researchers found that financial stress among their subjects had direct physical effects, including increased inflammation. This inflammation isn’t just linked to poor mental health outcomes – it can also contribute to an increased risk for heart disease. Additionally, stress can cause the following physical ailments:
- Weight gain or loss
- High blood pressure
- Gastrointestinal issues
Untreated stress can be dangerous, but many ways we choose to self-medicate can also be incredibly harmful. Drinking and drug consumption are both common ways that individuals cope with stress. Roughly 18% of Canadians have increased their alcohol consumption during COVID-19, attributing this increase to the following reasons:
The more we leave our finances mired in uncertainty, the more likely it is that our stress levels will begin to rise. There’s so much we can do to combat this stress, starting with a thorough examination of our finances.
A Step-by-Step Guide to Taking Ownership of Your Finances
If you have never sat down and tried to understand your finances, or if it’s been a while since you looked, it’s understandable to feel intimidated by the process. Fortunately, you don’t have to do everything at once. If you can slowly approach this intimidating task, it will be much easier for you in the long run.
Here’s how to get started.
Gather Information on Your Finances
At the most basic level, understanding your finances means understanding how money comes in and how it goes out every month.
First, list all your income sources. These may include:
- Monthly take-home salary
- Investment income
- Interest earned from savings
At this point, you should only be focusing on predictable, regular income streams. Leave out anything that isn’t a steady source of income, like bonus payments or gifts.
After that, make a second list with all your expenses. Add up every predictable monthly expenditure, along with ones that occur quarterly or annually. Items on this list will likely include:
- Mortgage or rent payments
- Insurance premiums
- Car payments
- Monthly transit passes
- Membership fees
Creating these two lists will help you understand how much money is coming in and how much money is going out. Once you have a handle on your income and expenses, you can track whether you’re spending within your means or living beyond them.
Make a New Budget
If you aren’t spending within your means, you’ll need to think carefully about how to remedy that issue. Most people start by cutting out expenses, which is essential, but adding an increased or additional income stream can also help.
A great way to help you live within your means is to make a budget. If you’re spending haphazardly and always seem to be low on money at the end of the month, a budget can help you stick to your goals long-term.
Create Clear Financial Priorities
One of the most frustrating aspects of the COVID-19 pandemic was the uncertainty that crept into our daily lives. This made it difficult to create plans and stick to them. Many people who were saving for a holiday found themselves forced to use those funds for rent. In contrast, others who dreamed of buying a home could suddenly afford it due to market fluctuations and an increase in available income.
Whether you had financial goals that were derailed or achieved during the pandemic, now is a great time to re-evaluate your future financial priorities. Decide where you’d like to be financially in 1, 5, and 10 years, then start implementing habits to help you get there.
Plan to Save
If you have financial goals, achieving them typically involves a savings plan. A budgeting tool like the ones we mentioned above can help you get there. If you’re saving for a holiday, a long-term financial goal like a house, or retirement, tracking your progress month by month in a budgeting tool can help keep you motivated.
Separate from your savings goals, most financial experts recommend creating an emergency or rainy-day fund that contains approximately 3-6 months’ worth of expenses. This approach can soften any problematic financial situation like losing a job, a medical emergency, or even the accidental destruction of expensive assets like a car, phone, or laptop.
Explore Other Positive Financial Changes
Improving your finances isn’t necessarily just about examining cash flow. In most cases, there are minor tweaks that you can make to save money, improve your credit, and set yourself up for a more favourable financial outlook in the future.
Credit cards are a great example of this. There are many different credit cards available to Canadians, depending on their needs. Do you shop online in USD frequently? Find a credit card that offers no foreign transaction fees. Most major Canadian banks offer credit cards with travel rewards points if you love to travel, giving you a set number of points for every dollar you spend. The ideal credit card should build your credit while offering rewards that are beneficial to your life.
Some other habits that can improve your finances include:
- Bundling expenses like insurances or wireless and phone bills. You may find that opting for a single provider for these expenses offers monthly savings.
- Setting your credit cards to autopay so that you never forget to pay a bill.
- Paying off debts with the highest interest rates first.
- Tracking your monthly bank fees, then switching to an account with lower fees if possible.
- Don’t skimp on insurance. Paying a small monthly fee is preferable to be left high and dry in an emergency.
Schedule Regular Financial Check-Ins
While you’re still riding high from the satisfaction of gaining control of your finances, set a date for your next check-in. You should regularly examine your finances to see whether your budget and savings goals are on track. If you’re part of a family unit, you should be doing this with your partner.
These regular financial check-ins can help you be more proactive about your finances, allowing you to course-correct if you seem to be veering away from your budget and goals. It’s much easier to fix an overspending problem when you catch it before you’ve gone into debt.
As we’ve seen during the COVID-19 pandemic, our circumstances can change quickly. It pays to be aware of our finances, especially given their impact on our mental health. Are you looking for more resources about how to handle your finances? Canadians of all ages and income levels rely on the financial advice and other resources from Creditpicks.
Explore our site to learn more about the decisions that can set you up for a healthier financial future.