Beginning in March 2020, the country was shocked and horrified as the economic and health impacts of the COVID-19 crisis spread. Flights were grounded, stores shut down, and many Canadians were unemployed.
The number of people who were unemployed in Canada dramatically increased in May 2020. Almost 14% of the population was out of work, and nearly 4% more could not find enough work hours.
The economic crisis brought about by job loss was only one of many sources of financial strain. Canadians were made to reduce their working hours to provide care for family members who were sick or needed extra attention.
Furthermore, parents of young children, primarily mothers, had to decide between their job and looking after their children when the transition to online learning took effect.
Financial Stress and Uncertainty
Financial stress and fear have become more prevalent throughout this unpredictability period. According to a study by FP Canada in July 2020, between one-quarter and two-fifths of Canadians cited money as the primary source of stress.
As more Canadians got vaccinated and the pandemic's effects lessened, they began returning to regular routines. But the pandemic had significant financial impacts on many. Therefore, it is vital to continue reassessing your financial position and emergency preparedness. Even if you have been able to keep your job, your financial priorities likely shifted.
This article explores strategies for handling your finances, leading to a happier, more stress-free life.
The Impact of Financial Stress on Personal Wellness
Unsurprisingly, financial concerns are a significant source of stress in our current society. Even relatively well-off people are still preoccupied with money, and this tension can lead to severe mental health issues if not addressed.
A 2016 study revealed a direct correlation between financial worry and heightened levels of inflammation. Not only can this be linked to a decline in mental health, but it can also raise the chances of developing heart disease. Moreover, financial stress can produce physical manifestations such as the following:
- Insomnia.
- Weight gain or loss.
- Headaches.
- High blood pressure.
- Gastrointestinal issues.
Neglecting stress can be dangerous, and how we attempt to cope can be damaging. Unfortunately, many people turn to alcohol and drug use to manage their stress. For example, during the COVID-19 pandemic, approximately 18% of Canadians have increased their alcohol intake. The reasons for the increase in consumption ranged from boredom to fear.
If we let our financial situation stay in limbo, our anxiety will likely increase. However, we can take steps to reduce our worry, beginning with a comprehensive look at our finances.
How to Take Ownership of Your Finances
Creating a budget can be helpful if you're having trouble managing your finances. A budget will help you stay within your spending limits and achieve long-term financial goals.
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It's understandable to be intimidated if you're new to or out of practice managing your finances. Don't feel overwhelmed; breaking it down into smaller steps can make the process more manageable.
Though this article was initially written in 2021, the basic money management principles still apply. We will regularly update this post.
Gather Your Financial Information
Knowing your financial situation requires awareness of how much you earn and spend monthly. Start by jotting down all your income sources, such as wages, investments, etc. These sources may include the following:
- Monthly take-home salary.
- Investment income.
- Interest earned from savings.
Right now, it's best to concentrate on consistent sources of income. So anything that doesn't come in regularly, like bonuses or presents, should be excluded.
Next, create a separate list of all your expenses. Sum up your expected monthly payments and those that happen every three, six, or twelve months. Possible items on this list may include:
- Mortgage or rent payments.
- Insurance premiums.
- Car loan or lease payments.
- Taxes.
- Monthly transit passes.
- Membership fees.
Recording your income and expenses will help you better grasp your financial situation. This way, you can monitor whether you are staying within your budget or overspending.
Create a New Budget
Now that you know how much you make and spend, it is time to start managing your money. If you are overspending, you should consider ways to fix this. Of course, cutting back on expenses is important, but finding ways to make more money can also be helpful.
Creating a budget can be helpful if you're having trouble managing your finances. A budget will help you stay within your spending limits and achieve long-term financial goals.
Many Canadians use budgeting programs such as Mint, and You Need a Budget (YNAB). These helpful tools are available on the internet or as an app. The apps let you watch and regulate spending, even when out and about.
Plan to Save
To reach specific financial objectives, you must create a budget. Utilizing budgeting apps and programs can assist you in staying on track and motivated toward reaching your goal, whether for a vacation, a home, or retirement.
It is essential to set aside funds for unexpected expenses. Financial advisors suggest reserving 3-6 months' worth of expenses to prepare for possible financial hardship, such as job loss, medical bills, or costly replacements.
Set Your Financial Priorities
The pandemic created an atmosphere of unpredictability that made it hard to make and stick to plans. For example, many people who wanted to go on vacation had to use the money for rent instead. While others, who had been unable to purchase a home, suddenly had the means to do so due to changes in the economy or a wage boost.
Now is the time to take another look at your financial objectives, whether they were achieved or hindered by the pandemic. First, consider where you would like your finances to be in the next five to ten years. Then, start developing practices to help you reach those objectives.
Financial Habits, Systems, and Goals
Systems are a series of good habits that result in goal achievement. Systems can apply to anything you want to identify, change, refine, and sustain. If properly employed, systems are life-changing and almost always result in positive outcomes.
The following good habits are a great start to your financial system:
- Regularly set achievable short-term financial goals and track your progress in completing them.
- Insure what you can. A small monthly fee is preferable to being penniless in an emergency (even if you have an emergency fund).
- Bundle your insurance or internet and telephone bills. You may also find that moving your services to a single provider will also lower your monthly bill.
- Set your credit cards to autopay, so you never forget to pay a bill.
- Get a credit card that matches your lifestyle. Whether a student credit card, a rewards credit card, or a secured credit card, you can find a card with a rewards program that matches your needs.
- Pay off debts with the highest interest rates first.
- Track your monthly bank fees, then switch to a bank account with lower fees if available.
- Set long-term goals and start retirement planning early. Your older self will thank you.
These habits are small steps that you can take toward becoming financially independent and savvy. If you look at your spending patterns, including subscriptions, delivery fees, etc., you will find ways to reduce your monthly outflow. Over time, saving money will become fun.
Other Positive Financial Actions
Managing your finances is not only about tracking your income and expenses. You can usually make minor changes to save money, raise your credit score, and improve your long-term financial prospects.
Credit cards offer Canadians convenience and flexibility, with many options depending on their needs. For example, if you shop online often in US Dollars, look for a credit card with no foreign transaction fees. There is an ideal credit card for everyone. Take your time and review all of the different credit cards available.
If you're a frequent traveller, many of Canada's leading banks offer credit cards with rewards points. You can gain a certain number of points for each dollar you spend, meaning you can find a card that helps you build your credit and provides rewards that best suit your lifestyle.
Schedule Regular Financial Check-Ins
Maintaining control of your finances and regularly checking in to ensure your budget and savings goals are on track is important. If you have a family, this should be done with your partner.
Regular financial check-ins can help you stay on top of your budget and goals. It can also help you identify and address overspending issues before they lead to debt.
Personal Finance is Important
The COVID-19 pandemic has shown how quickly our circumstances can change. Staying on top of our personal finances is essential, which can also affect our mental health.
Creating a budget, setting goals, and regularly checking your progress is critical to lowering your financial stress and overall well-being. Get a high-interest savings account and save for retirement. Invest using a TFSA and ensure at least some of your earnings are tax-free.
Creditpicks provides financial advice and resources to Canadians of all ages and income levels. Read more on our site to discover ways to help create a better financial future for you.
