By Jasmin Brown, BDO First Call Debt Solutions

BDO First Call Debt Solutions

How to Create a Crisis Budget

Apr 14, 2020 | 9:29 AM

In this column, I often write about the importance of having a household budget in place to track your spending and expenses, optimize your income and save for retirement. However, what would happen to that budget if a sudden financial crisis were to hit? Loss of income, the death of a spouse and business failure are all common causes of a financial crisis for families, and unfortunately, the COVID-19 pandemic is triggering these scenarios for many across Saskatchewan and Canada.

What is a crisis budget?

A crisis budget is different from a typical household budget because it identifies and prioritizes expenses and financial obligations that are essential. When a major event happens in your life that negatively affects your finances, you need to make important spending adjustments to successfully stay afloat until things return to normal for you.

Before we get started, if do not already have an everyday household budget, you can still develop and implement a crisis budget. This budget worksheet on our BDO Debt Solutions website is a good place to start.

Five steps to help you prepare your crisis budget

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1. Determine your ‘new’ household income. For those Canadians that have been affected by the COVID-19 crisis, the federal government is helping in a number of ways, including accelerated access to Employment Insurance (EI) and increases to the Canada Child Benefit and the GST credit. If you are not yet certain what your total income will be, do your best to estimate and use that figure for your crisis budget. You can always make adjustments as you determine what assistance you will receive.

2. Categorize regular budget items as either a “need” or a “want”. If you already have a household budget, there is no need to recreate categories, simply look at each line item and categorize it one way or the other. Restaurant meals, entertainment and hobbies and activities, are common examples of expenses that are most often categorized as “wants” during crisis times.

This step is the most crucial in creating your crisis budget but also the most difficult. These decisions and changes are not forever, so it is important to be really honest with yourself and determine what you can do without for the short-term. Altering your lifestyle, even if only for a limited time, can be tremendously challenging, but trimming as many “wants” as possible will maximize results.

3. Adjust your essentials where possible. For essentials such as groceries, purchase no-name brands when available. For monthly vehicle use, walking or cycling for shorter trips can save on fuel consumption. Where possible, move cell phone plans to less expensive, reduced-data options.

4. Pause service contracts and subscriptions where possible. In many cases, it’s worth inquiring with your cable company, and your music, magazine or news subscription service providers to see if your contract can be downsized, paused or cancelled for three to four months. Often accommodations can be made.

5. Ask creditors, credit card companies, financial institutions and local social organizations for help. To adjust to the widespread impact of COVID-19, many financial institutions have reduced or eliminated fees, or paused monthly payments. Others are evaluating customers’ situations on a case-by-case basis.

Contact a Licensed Insolvency Trustee if you need assistance with your budget, having trouble making ends meet, or managing your debt because of COVID-19. A Trustee will review your financial situation, explain all available debt relief options, and help you choose a solution that will work for you.

During this COVID-19 crisis, nothing is more important than ensuring the health and safety of our people, clients and communities. Currently the BDO Debt Solutions physical offices are closed, but we remain open. Our employees are working from home for the foreseeable future.

We will conduct consultations, sign-ups and counselling by phone or videoconferencing on whichever platform you are most comfortable with, including FaceTime, WhatsApp, Zoom and more. And we will be as flexible as possible with appointment times. For documents such as income and expense reports, and tax information that must be sent by email or fax, we offer free scanning apps like Adobe Scan. We are also accepting pre-authorized debit (PAD) to make payments.

Call us at 1-855-BDO-DEBT and let us know how best we can serve you.

Are you struggling to manage your finances during these uncertain times? Find helpful resources and information about financial relief and debt solutions by visiting us on Twitter