By Sheila Walkington BBA, CFP®
No matter what your financial circumstances, you’re probably at least a little bit freaked out by the impact that COVID-19 is having or could have on your day to day cash flow. Whether you are employed, self-employed or drawing income from your investments in retirement, COVID-19 doesn’t discriminate. It’s hitting us all where it hurts financially, myself included.
The antidote to fear is knowledge and a plan.
While you might dread the thought of tracking or tallying up all your expenses, there has never been a time when this is more critical. To regain some sense of control and financial stability, you need to be very clear with what your expenses are and how to prioritize if you are faced with a drop in income.
Knowing how much money you absolutely need to pay the bills and how much you need (or want) for some of the more discretionary expenses will help you see the full picture, and help you plan forward.
I have always kept a very close eye on the expenses for my husband and I. Being self-employed and not always knowing what my monthly income will be, I felt comfort in at least knowing what I needed, bare minimum, to make ends meet. And on the flip side when money became more predictable and perhaps a bit more flush, knowing our numbers made it easier to plan for savings, debt reduction and some extras like travel.
In mid-March when it became clear that COVID-19 was going to shut down stores and businesses, one of the first things I did was revisit our numbers. Could we live on my husband’s income alone? Would we have to defer our mortgage to make ends meet? What could we cut if need be?
If I hadn’t worked through the financial implications of all these scenarios, my initial fear/panic would have been hard to soothe. The outcome of this planning exercise gave me a sense of relief that yes, if our income was severely reduced, we could still manage.
Doing the Numbers
Use our Spending and Savings Plan worksheet to calculate and review your numbers. First determine what your spending and bills are, then use the 3rd column to tally and calculate your essential monthly spending and bills you need to plan for during these extraordinary times.
Here’s a run down of what I determined for our own expenses to give you an idea of how this exercise works:
Bills/Expenses we will not be incurring for now:
- House cleaner, cancelled. Savings $144/mo
- RSP savings – on hold for now. Savings $1,000/mo
- Bus pass. Husband now working from home. $80 savings
Total Monthly Savings: $1,224 (now being added to our emergency fund)
Savings Accounts we normally fund (and money we won’t be spending)
If you are familiar with our On Track Money Management System, and our “envelope” or “bank account” system, these are the amounts that we save to various accounts each month. Many of them could be completely eliminated if our incomes dropped.
- Family Fun. Eating at home only. No takeout, movies or entertainment. $200/mo
- Travel savings. All on hold! $475/mo. We even received some deposits back on spring and summer trips cancelled.
- Gas. We are not driving anywhere, except the grocery store that is 2 kms away. $80/mo
- Annual boy’s trip/weekends for hubby. $100/mo
- Gifts. $200/mo (sorry family, but a nice e-card may be in your inbox this year)
- Sheila’s spending money (clothes, hair, wine, take out coffee etc) $400/mo
- David’s spending money (clothes, hair, beer, take out coffees, etc) $400/mo
- Medical/Dental (chiro, massage, dental) $150/mo.
Total Savings: $2,005 (now being added to our emergency fund)
If Cash Flow gets really tight:
- Mortgage deferral (savings $2,347/mo)
- Monthly charitable donations: $63
- Fortis gas – $20 – can be deferred interest free for 3 months (but then payable over next 12 months)
- BC Hydro. $144/mo. (If either you or your spouse stop working due to COVID-19, you may be eligible for three months of bill credit based on average consumption)
- Defer BC Property taxes. In BC if you are 55 or older you can defer your annual property taxes. Hubby happens to qualify for this if need be. About $1,800/yr, so $150/mo.
Total monthly expenses we could defer (or reduce): $2,751. Most of these are not actual savings, only a deferral of payment, so eventually the amounts would have to be repaid (except the donations which I am reluctant to cancel at this point.)
Some discretionary expenses we have not deferred or cancelled, and likely won’t:
- My monthly yoga membership to Hot Yoga 101. They have been doing daily online Zoom classes, and they are awesome! I now have more time than ever to do yoga, all from the comfort of my own home.
- Art supplies. My husband David loves to paint, and so he put in an online order (we are still waiting!) for more supplies to keep him busy.
- We seem to be happy to give up beer and wine, but coffee has been deemed essential.
One Expense that has gone up:
- Groceries. Bulk shopping is expensive! We are trying to shop only every 10-14 days and each shop has been way more expensive than our normal grocery bill. But I will say we have enough oatmeal, pasta and cheese to last us for a few weeks. I am hoping we can eat from the “cupboards” for a while now before we do another big shop.
Having a very clear spending and savings plan for our family’s expenses made it really easy for me to see at a glance what adjustments we could make right away to reduce our bills and spending. For now, my husband and I are still on full salary (thank you, thank you!), but I feel better knowing that we have a plan to turn to if either our incomes are reduced significantly.
Book a COVID-19 Cash Flow Consult below.