A plunge in oil prices teaches us that nothing is certain
(TORONTO, ON) — An election year is a great time for a government to deliver a balanced budget, and that is exactly what Finance Minister Joe Oliver is expected to do later today. It’ll provide political capital for the Conservative party as they trumpet fiscal responsibility, heading into a potential fall election.
But it was supposed to be even better. In November, Oliver predicted a small surplus, which was already lowered from a previous suggestion of an even bigger surplus. Tumbling oil prices changed the economic picture, and it appears the government had to do some serious financial maneuvering in the lead-up to the 2015 budget.
Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada, sees a lesson to be learned by Canadian families.
“If Canada can get caught off-guard, so can Canadians,” says Schwartz. “You might think that you are doing just fine but unexpected emergency costs or a sudden loss of income could happen at any time, and you need to have a plan.”
“Life can throw curveballs at you and it’s important to have both a long-term and short-term strategy when an emergency strikes,” says Schwartz. “Preparing ahead of time can help take the uncertainty out of things.”
With household debts at record levels and 51 per cent of Canadians living paycheque-to-paycheque, people may be more vulnerable than they think. Consolidated Credit has put together some short and long-term tips to help Canadians deal with a sudden financial shift:
Shrink your spending immediately – If there’s less money coming in, it’s imperative that less goes out. Take a close look at your spending habits and apply a strict test: is this a want or a need? Do a detailed audit of where your money is going and find out if you are overspending in certain areas. Chop down your cable/internet/mobile packages and don’t grocery shop without a flyer and a fistful of coupons.
Create or revise a budget. If you don’t follow a budget, or haven’t revisited your budget in a long time, it’s time to make a new one. You need a spending blueprint that reflects your current reality – the Canadian government had to pivot, and now you do. Even if your financial situation improves, creating a strong budget will also create good habits for the future.
Look for other sources of income. If your immediate future may not include income, find out whether or not you are entitled to Employment Insurance and how you can apply. Look into what other sources of income you may be entitled to including severance, unpaid overtime and unpaid vacation.
Pay down debt. To protect against any future uncertainties, pay down debt as much as possible. Simply adding $20 or $50 to your credit card’s monthly minimum payments will save you years of high interest – try our credit card debt calculator and see for yourself. By clearing your credit card balances, you’ll have one less bill to worry about in the event of a sudden job loss or reduction in income.
Build a surplus. Create an automatic savings plan so that a regular amount of your paycheque will go to a savings account. Aim for an emergency fund that will cover three to six months’ worth of living expenses. Garnishing your own paycheque today will mean that you will have some padding if something goes wrong tomorrow.
Seek help. If you are barely meeting your financial obligations while the going is good, then you’ll certainly run into trouble if you have less money coming in. You might need a leg up. Speak to a financial advisor or a non-profit credit counselling organization to learn about the options available to help you get ahead.
About Consolidated Credit Counseling Services of Canada, Inc.:
Consolidated Credit Counseling Services of Canada is a national non-profit credit counselling organization that teaches consumers about personal finance.
For more information or to request an interview with Jeffrey Schwartz, please contact: