In a short span of time, the pandemic has created a “new normal” for Canada and the World. The vast majority of industries have been heavily impacted by the pandemic; especially travel and hospitality. For instance, Airbnb CEO and Cofounder Brian Chesky stated in Travel-Has that “travel has changed forever” and “The World of travel as we knew it in January is never coming back”.
In Toronto, restaurants were only allowed to stay open for pick-up and delivery and recently people have been permitted to eat in patios and in reduced seating areas indoors. With recent spikes this may change.
Here are some facts that demonstrate the drastic impact Covid-19 has had on businesses and consumers:
• A Canadian Federation of Independent Business (CFIB) survey recently revealed that only one third of businesses had returned to pre-pandemic staff capacity. Source: https://ca.finance.yahoo.com/news/get-used-to-fewer-employees-for-the-next-three-months-statistics-canada-164041459.html
• Almost two-thirds of businesses reported that they expect their number of employees to remain the same for the next three months. Source: https://www150.statcan.gc.ca
• 58% of small business owners reported that they expect their revenue to decrease in 2020, despite that 47% of surveyed businesses stated they remained open during COVID-19 pandemic. Source: https://www.prnewswire.com/
• The Canadian Federation of Independent Business (CFIB) surveyed small and medium sized businesses and 16 percent stated they would be forced to close down permanently because of pandemic closures.
• The pandemic has caused significantly more businesses to operate remotely and allow employees to work from home. Employer’s or employees who are able to work from home can save on commuting. As of February 1, 2020, 16.6% of businesses reported that 10% or more of their workforce worked remotely, while as of May 29, 2020 this figure nearly doubled to 32.6%. This is helpful because people can save on commuting and other expenses. Source: https://www150.statcan.gc.ca/
• According to Statistics Canada, 80.5% of businesses expect to need personal protective equipment and other covid-19 related supplies as social distancing measures are relaxed.
Many businesses are struggling to operate under this new environment. For instance, David’s Tea filed for creditor protection under the Companies Creditors Arrangement Act (CCAA) and announced it is closing 82 stores in Canada and all locations in United States. Although it does plan to expand its e-commerce business and supplying grocery stores and pharmacies. Source: CTVNews
Not only are businesses making less money, but many companies are being forced to spend more money Covid-19 requirements. Sanitation, PPE equipment and other Covid-19 related expenses (i.e. Plexiglas shields and air filtration) are all necessary. Unfortunately, these rising costs are forcing many businesses to look for alternatives to stay afloat. David’s Tea, for example, is focusing more on online sales while physical distancing measures are in effect. As well, many companies are not accepting cash and instead are only taking payments through apps or other cashless methods. What this means is that it’s now particularly important to keep up with your credit card transactions.
Consequently, many businesses are raising prices and are charging “Covid Surcharges” just to stay in business. It’s important to be mindful of this and make sure you know the cost upfront before making a purchase. For instance, Simcoe Dental Group stated in an email that it has “no choice but to institute a $10 charge per visit, which will only partially offset the increased cost of the new safety measures”. Source: https://www.cbc.ca The problem is that many people are out of work and collecting the Canadian Emergency Response Benefit or their hours have been significantly reduced.
The good news is that due to the partial closure of the economy many people are finding that they have been more easily able to save money. This is particularly due to the fact that many are saving on unnecessary expenses such as attending sporting events, concerts, movie theatres and other activities where physical distancing is difficult. Obviously, due to a reduction in income this is not possible for some but if you are able, save as much as you can. Here are three ways to save money during this unprecedented time in Canada:
1) Clear your highest interest debt
If you find yourself able to save because of a reduction in spending, it would be beneficial to pay down high interest debt i.e. credit cards. Especially if you have been granted payment deferrals by the financial institutions you deal with. Also, federal and provincial regulators are working to come up with a system that would ensure borrowers are not negatively affected for special payment arrangements. Equifax stated “We understand that people are concerned about how deferred payments and other special arrangements may affect credit scores. We are working together as an industry to help minimize any negative impact on credit standing while maintaining the data integrity that underpins our ecosystem,” Source: Globalnews
2) Reduce monthly recurring fees
It’s recommended you contact your cellphone and cable provider to see if you can obtain lower rates or optimize your package. Also, you should contact your insurance company to see if rates could be reduced for your car insurance as you’re using less mileage. Another suggestion could be to review current subscriptions such as gym memberships and cancel or change when it makes sense to do so.
3) Consider a consolidation loan or debt restructuring plan
As stated above, many individuals and businesses are struggling a lot with the financial hardship the pandemic has caused. While you attempt to figure out your financial situation in the short and long term it might be prudent to consider filing an informal or formal insolvency proceeding. An informal debt restructuring plan involves having a professional debt consultant contact your creditors and try to negotiate a settlement on your behalf. The downside is that with this solution you might be forced to pay a significant consulting fee.
Another solution could be to get a consolidation loan in which you pay off all debt with a loan in exchange for paying a lower interest rate. The primary advantage is that you only have one monthly payment instead of multiple monthly payments. This makes it easier to keep up with payments and avoid high interest fees and penalties. The disadvantage is that for a debt consolidation loan many borrowers will require collateral. Additionally, if you had difficulty making payments on four or five credit cards and/or small loans you may still have trouble paying one large loan.
If you simply have less money coming in than you have going out, a debt consolidation loan is not practical. A Consumer Proposal is a formal agreement put in place by a Licensed Insolvency Trustee (LIT) and overseen by the Office of the Superintended of Bankruptcy (OSB). The trustee will work with you to develop an “arrangement” with your creditors to pay a percentage of what is owed or extend the amount of time you have to pay off debts, or a combination of both.
The Covid-19 Pandemic has had massive impact on Canadians both financially and emotionally. Unfortunately, some individuals have been impacted considerably more than others depending on the industry they are in. If you, a family member or a friend are struggling to keep up with monthly obligations please know that help is available. Companies like Prudent Financial offer equity loans which can be used to consolidate debt for anyone regardless of your credit situation. As well, Prudent Financial Services offers free consultations. For more information consult one of our loan officers at 1-888-852-7647 or visit our website at PrudentFinancial.net
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