This week, the International Monetary Fund (IMF) announced that the coronavirus pandemic has put the world in a "Great Lockdown" which will cause the world economy to "experience the worst recession since the Great Depression." As countries around the world brace for the economic impact, businesses and individuals are also looking for creative ways to survive this economic downturn.
Considering that we're at the beginning of what could be a long recession, now is an excellent time to review budgets for areas to cut and create contingency plans.
Prepare for a Financial Emergency Now
Whether you're renting or you own your home, it is important to ensure that you can continue to make your rent or mortgage payments as well as any car or debt payments should you lose your job or suffer a loss of income. If you're a homeowner, ensure you can pay your home insurance, taxes, utilities and other necessities. Is your budget adequately padded for such an emergency? Here are some things to do to prepare:
1. Cut out the non-essentials
With social distancing in place, many people are spending less month-to-month. Review your expenses and determine what is a necessity and what isn't. Consider cutting the items that are not necessary now, even if your income is stable for the moment. Take the money that you're saving and put it in an emergency fund like a TFSA so that you'll have some savings to help you get by should you lose your income.
2. Find ways to pay less
Homeowners may want to review their mortgage rates and terms to ensure they're favourable for an economic downturn. Can you renegotiate your rate or change your payment frequency? Make an appointment with your financial institution to discuss your options.
Are you overpaying on necessities like your cell phone or rent? If so, consider looking for options that cost less. Basement apartments or rooms within a homeshare arrangement tend to be affordable options for renters. Consider moving in with a sibling, parent or friend so you can pool your resources during this difficult time.
Keep in mind, though, that in the current COVID-19 environment social distancing is critical to everyone's safety. Considering that many non-essential businesses are closed, it will take longer to find a new place to live, that's why it makes sense to start looking now, even if your income is secure for the moment.
3. Sell unnecessary, big ticket items
If you have a boat, RV, cottage, or second (or third) vehicle then consider selling it now, before we're deeper into the recession.
4. Reduce debt
Talk with a financial advisor about ways to eliminate debt like student loans, consumer debt and car loans. Consolidating debt may be a good way to save on interest.
5. Make extra income
Have extra time on your hands right now? If so, why not use that time to explore ways to make extra income – either now or in the future should you lose your job. If you can make extra income now, then you can boost your savings which will help you down the road. Or, take the time to put plans in place now so that if you need to make extra income later then you'll be ready to do so immediately.
Some ideas to make extra income include:
· Making and selling products online (i.e. mittens or scarves)
· Offering a specialized service online (i.e. music lessons)
· Renting out a room in your home (i.e. homesharing)
· Taking on a second (or third) job (i.e. grocery delivery service).
Even though you may not be able to enter into a homeshare arrangement during the lockdown, now is a good time to prepare your house for a renter, so that when the lockdown is lifted you are ready to increase your cash flow with rental income.
During the COVID-19 lockdown, the team at HomeShare Alliance is available to answer any questions you may have about your existing home share arrangement. As a non-essential service, we're not able to support new home shares at this time, but we remain available to offer our advice, so please reach out to us with any questions you may have.