Updated June 16, 2020. Small business owners at the bottom.
NOTE: This situation is rapidly evolving. We will update this every 24 hours to reflect changes to content so bookmark it. Check out our twitter feed for more info.
Here’s how to survive through a short-term (hopefully) financial emergency like this one. These aren’t ideal financial planning strategies under normal circumstances. However, these are anything but normal circumstances. The following tips are based on a 3 month emergency savings plan.
A step-by-step EMERGENCY money guide if you’ve lost your income or worried that you will:
- Calculate what income will be coming into you through CERB/EI/from employer.
UPDATE JUNE 16 – CANADA EMERGENCY RESPONSE BENEFIT (CERB) pays $500 per week of taxable income every 4 weeks for any 24 week period between March 15 – October 3, 2020. It is taxable but they will not be taking money off at the source so you’ll get the full amount now and you’ll pay tax on it in tax season 2021. The idea is that your income is likely low because you only qualify if you’re income is lost due to COVID. So, don’t over worry about the taxes on this while you’re in crisis. You will not get more than $12,000 over the 24 week period. (used to be 4 months. Extension came June 16, 2020).
The benefit will be available to workers living in Canada who are at least 15 years old and who:
- For your first CERB application:
- You have stopped or will stop working due to reasons related to COVID-19 for at least 14 days in a row for the 4 week period you are applying for.
- Also, you for those 14 consecutive days, you cannot receive more than $1000 employment income, self-employment income (unclear what this means for people who subcontract – see below) likely including earnings from a corporation like dividends. This is not confirmed in writing. Stay tuned), or Maternity Leave/Parental Leave.
- For your subsequent CERB applications:
- You continue to not work due to reasons related to COVID-19 at any time for the 4 week period.
- For the 4 week period you are applying for, you will not receive more than $1000 employment income, self-employment income, provincial or federal benefits related to maternity or paternity leave.
- Have earned $5000 in 2019
- Are not currently receiving EI or CERB for the same period.
These are 7 reporting periods/payment cycles.
|4-week period cycle||Period dates|
|1||March 15, 2020 to April 11, 2020|
|2||April 12, 2020 to May 9, 2020|
|3||May 10, 2020 to June 6, 2020|
|4||June 7, 2020 to July 4, 2020|
|5||July 5, 2020 to August 1, 2020|
|6||August 2, 2020 to August 29, 2020|
|7||August 30, 2020 to September 26, 2020|
Can you earn income while on the CERB?
Yes! If you are a seasonal worker who has run out of IE, a student or contractors/owner-operator (I translate this to self-employed)/part-time worker who continues to earn a modest (less than $1000 a month due to reduced work hours) income from part-time work, royalties and honorariums.
CONFIRMED – you have to pay back THE WHOLE $2000 if you earn even $1 above $1000.
What if you mess up and have to PAY IT BACK/Not eligible
All good. You can pay it back! You have to with a cheque and not online yet. They will be asking for proof of income next years taxes. They have been very clear that they aren’t out to penalize, but simply to recover money. They won’t hunt you down, charge you interest and send you to prison (this is a joke… a total joke.)
TBD: Will they claw back the whole amount or just the overage? Aka, you earned $1200 but collected $2000 in CERB. The max is $1000 and you have to pay back THE WHOLE $2000. (confirmed June 9). Call the CERB hotline for details. 1-833-966-2099
If you realize it now, and you’re well over and realize you’re not eligible, you can pay back ASAP. Write a cheque to the “Receiver General” and indicate that it’s for “repayment of CERB” on the memo with your SIN. Send to
Sudbury Tax Centre. 1050 Notre Dame Avenue Sudbury, ON P3A 0C1.
You should DO YOUR 2019 taxes on time but no rush. It looks like you don’t need it to apply for your first application, or to apply but you’ll likely need proof down the road.
If you were/are EI eligible in the old world (BC19-Before Covid19)
If you applied for EI after March 15, you’ll be put into this program for 16-weeks and if you’re still unemployed after the 4 months, you go back to regular benefits. CERB replaces all existing EI applications and benefits.
NOTE: If you’re already on EI for a mat leave or unemployment, you should not apply to CERB. Keep your thing going until October 3, 2020. Then, if you can’t go back to work because of COVID 19, apply for CERB.
Isn’t this more than regular EI?
i.e. you’re on mat leave right now, it ends in July. You’re job is not there for you to return to. Apply then. It’s taxable and monthly. I’m sure a lot of people will say “That’s more than parental leave!” But, it may not be. the $2000 is taxable and monthly. Let’s say you qualified for the max parental leave from EI. That would be $573 a week taxable. If that’s for a year, that’s 52 weeks x $573 = $29,796. If we divide this by 12 months, it’s $2483 per month before tax. So, if you were making more than $54,200 and on parental leave or EI regular benefits, your benefits are more than this.
What if I’m a student?
The government announced a new benefit called the Canada Emergency Student Benefit. $1250 a month to students. In addition, they are creating 76,000 new jobs for students and any student that is volunteering in a sector that is helping to stop COVID 19, you could get the Canada Student Service Grant (between $1000 – $5000!)
HOW TO APPLY FOR CERB?
HERE. They hope to have money going out within 3-5 days of application if you sign up with direct deposit. You will apply through your MYCRA account. Or this number 1-800-959-2019 or 1-800-959-2041.
You cannot be receiving the 75% wage subsidy and CERB at the same time.
IF YOU ALREADY APPLIED FOR EI – DO NOT REAPPLY.
Interesting – to not overload the system, they’ve done it by birthday. See below. Also at THIS LINK. They didn’t do it by zodiac signs….. Virgos would obviously want to go first and get their sh*t in order…. so maybe that’s why.
|If you were born in the month of||Apply for CERB on|
|January, February or March||Mondays|
|April, May, or June||Tuesdays|
|July, August, or September||Wednesdays|
|October, November, or December||Thursdays|
|Any month||Fridays, Saturdays and Sundays|
Also, Some people have gotten more than $2000. If you have,
TO DO: Get a MyCRA account if you don’t have one. Call 1-800-959-8281 and get one. WORTH THE HOLD MUSIC WAIT.
- Take a hard look at your current expenses. What do you need to be able to pay your bills and have enough money for groceries and basic spending? Do you have any bills that could be reduced temporarily? Try to get your monthly bills to fit within whatever income is coming in (work or Canada Emergency Response Benefit)
- INTEREST FREE GOVERNMENT STUDENT LOANS – If you’re paying back a government student loan, there’s a six-month, interest-free reprieve on government student loan payments.
- The Bank of Canada has made a second unscheduled cut to its benchmark interest rate, lowering it to 0.25 per cent amid the COVID-19 crisis. If you have a mortgage, talk to your mortgage broker ASAP to see if rolling debt together and consolidating may be worth it to break your mortgage given lower rates.
- Can you PAUSE YOUR CAR INSURANCE? If you’re not commuting…. maybe you don’t have to pay it for 2-3 months?
- MORTGAGE DEFERRAL the big 5 banks have offered a 6 month deferral program for mortgages for people depending on their circumstance. READ THIS LINK. Check with your bank to see if that help applies to you. If you have your mortgage elsewhere, contact your lender ASAP to see if they have plans to follow suit.
- HOW IT WORKS? Now that we see how the banks will start rolling this out, it looks like they will be lending you the money to pay your mortgage and then rolling that into your mortgage. Therefore, you will be charged interest on the interest you’d already pay….that’s compound interest. That sucks. The other thing is that your credit score may take a hit and you’ll likely have to increase the amortization of your mortgage again at refinancing so that the payment doesn’t jump. THIS ARTICLE CAN HELP EXPLAIN. Therefore, taking advantage of a mortgage deferral such as that is only beneficial for those who have lost their income, have no savings/emergency accounts and are facing down high interest debt to make ends meet (like credit card or lines of credit that have higher interest rates. So, if that’s you, this program could still be super helpful for you (even with all of the above bummers) because you’re going to use debt to make ends meet anyways and at least this way it’s likely cheaper rate because it’s at your mortgage rate and so it should be much lower than all other sources of personal debt. Be sure to ask that question to your broker. Also be sure to run the numbers between how much extra interest you’ll pay on this mortgage deferral loan vs your own line of credit to keep making your monthly payments. This could be a customized advice thing. If you have savings or didn’t lose your income, this isn’t a program you’ll want to take advantage of as it’s borrowed money. For those who may use this program, I think there is something to be said about wellness here. If having your mortgage payments stop for 3-6 months after you’ve just shut down your business makes you feel safe, the additional interest (while a bummer) may be worth it for the mental health aspect of breathing a bit easier until we know what’s what. For the record, we don’t make any money at all from anyone whether they use savings, debt or investments to survive. This is entirely unbiased. Sometimes, a bit of extra interest is worth it’s weight in Virtual Therapy. My two cents.
- See if your bank is actually going to charge you the interest. Some, namely National Bank as of April 6, are starting to forgive the deferral interest. Maybe more will follow suit.
- TO THE LANDLORDS OUT THERE – I know this is hard for many of you too. I see you. But, you can write off this interest on your mortgage. I did the math HERE. If you have an $800,000 mortgage at 2.9% for 25 years, you will pay $323,408 in interest over the life of your mortgage. If you defer your mortgage (appx $4000 a month) for 3 months to give your tenant who may have lost their job a rent break, $12,000 would be added to your mortgage. If you use this site and pop in $812,000, you now would pay $328,259 in interest over the life of your mortgage because of deferral. This is $4851. That’s it. Over 25 years to give someone a fighting chance in this economy. Plus, you can deduct this. Perhaps you seriously debate taking this deferred mortgage and maybe raise rent by only $16 a month to offset the extra interest you’ll pay over the 25 years. We are all in this together. There is no aid for renters. See if you qualify for mortgage and try to help where you can.
- CHECK IN WITH YOUR BANK – See if your bank is lowering credit card rates. Most are. Any loan payments can be missed?
- Do you normally pay for any subscriptions or memberships that you won’t need during social distancing that you can temporarily suspend? While it’s important to get things as pared down as possible, be sure to think about what will keep you going during this time and how much it costs. For example, you could cancel your Netflix subscription, but will that extra $15/month saved be worth it? Figure out your total – how much do you need each month to make ends meet? Write this number down.
- Will daycare/extracurricular costs be suspended during this time?
- Let’s say you need $2500 a month to crack the nut after paring down all expenses you can during this pandemic.
- MORE BENEFITS CCB AND GST to families with new stimulus package. Take a look at any income your household will have coming in over the next little while. Include everything – child tax benefit payments, GST/HST rebates, trillium benefit payments, any income that you may still see from your business. If you haven’t checked your MYCRA account for uncashed cheques definitely do that now!
If you qualify for the GSTC Goods and Services Tax credit (this is that quarterly cheque from the government) you’ll get $300 and $150 per child. It’s coming in April now, not May.
This will double the maximum annual GSTC payment amounts for the 2019-20 benefit year.
For families with children who qualify for the Canada Child Benefit (CCB) (this is the monthly tax free benefit), the Government is proposing to increase the maximum annual payment amounts by $300 per child from 2019-2020. It comes out in May, 2020. USE THIS LINK TO APPLY for CCB if you’re not already getting it/enrolled.
THIS IS A HELPFUL CALCULATOR from Preet Banerjee.
- Also, DO YOUR TAXES!
- If you are self-employed and still able to earn some money virtually, can you have clients/customers pay you ASAP (no accounts receivable) and by e-transfer or direct deposit rather than cheque? Anything that helps reduce delay on you getting paid is helpful! Tally all of those up and figure out what the shortfall is between the amount of income and the amount of expenses you calculated in step 2. This shortfall is what we’re going to need to make up with emergency sources of cash.
- Your shortfall is $2500-2062 = $437.50. If this income crunch goes on for 3 months, your overall shortfall is $437.50 x 3 = $1312.50 You’ll need to fund that from savings or lines of credit. Hopefully the government will come up with some programs to help offset the cost of life for people during this time.
- If you have money saved: Start pulling money from non-invested cash, high interest savings accounts, and TFSA savings first. Don’t take money from your RRSP if you can help it. Put all of this cash into one savings account. This is like your security HOLDING TANK.
- You have money saved but it’s invested/no money saved: You need to decide whether accessing debt (like a line of credit) vs. selling off invested money in your TFSA or non-registered account (don’t take money from RRSP) is a better option.
- Selling TFSA investments may mean crystallizing an investment loss.
- For example, you invested $1000, it’s worth $800 now. If you take the $800 out, you’re locking in that $200 loss rather than waiting it out to potentially go up once the stock market recovers. Consider this carefully. If the money you have invested is part of your long-term savings plan (like retirement) and if you have access to low interest debt (like a line of credit) that could be a good SHORT-TERM SOLUTION. Just ensure it’s likely that you will have the cash flow to pay it back once this is all over.
- If you don’t have access to a line of credit and need to pay your bills, you may need to cash in some of your investments so that you don’t have to live off a credit card. This is not ideal but if you can’t pay your rent or mortgage and you don’t have a line of credit, you need money to come from somewhere. If you have $20,000 invested in a TFSA, take 2-3 months of your shortfall ($1312.50) and move to cash so you can live off of that. Yes, it’s possible the market goes down further and you’ll be happy you took it when you did. It’s also possible the market goes up and you’ll kick yourself for taking it when you did. No one has a crystal ball. No one. All you can do is make the best decision you can with the information you have. The real strategy here is not to panic and sell everything. Take only what you need to keep your head above water.
- TAX DEADLINE EXTENDED If you’re self-employed you may have a cash savings account filled with money for your HST/GST and income tax bills. Treat this money the same as you would think about taking on debt from a line of credit – if you need to access these funds, you may do so to make ends meet, but you will need to pay that back later. CRA has extended deadline to June 1 for personal taxes to be filed and payment owing to the CRA can be deferred until after Aug. 31. If you have access to debt like a line of credit, you can always use this to pay your tax bill down the road and save on interest payments now (and then pay them later).
- 1. Personal and Corp taxes deadline to pay extended to Aug 31
2. Gst/hst for your business is now deferred to June 30, 2020.
- Quarterly filers have to remit amounts collected for the January 1, 2020 through March 31, 2020 reporting period; and
- Annual filers, whose GST/HST return or installment are due in March, April or May 2020, have to remit amounts collected and owing for their previous fiscal year and installments of GST/HST in respect of the filer’s current fiscal year.
3.As for source deductions for payroll, still due at the same times but 75% wage subsidy See bottom of post.
- Once you’ve identified your sources of emergency cash, you’ll do what we call a “controlled burn”. A controlled burn means that you take exactly what you need – no more – each month and move it into your chequing account to pay for your life. We limit it this way to create the illusion of a steady pay cheque and budget within that, so that we don’t fall into the trap of taking on more debt or blowing through more cash than absolutely necessary.
- From a LOC, you’d take $437.50 a month to your chequing account
- From your cash savings account, you’d take $437.50 a month to your chequing account
- From your TFSA, you’d move the whole thing to a cash savings account and take $437.50 a month to your chequing account. You feel me?
- Make a plan to repay! If you’ve had to borrow from a form of debt, or from your tax savings, we will need to pay that back when all of this is over. It’s a good idea to try and ballpark a plan now, before you take on this debt – so that you have an idea of what you’re looking at in terms of a payback plan.
- If you don’t have any savings and no access to a line of credit, you’ll need to get extra creative to try to bring in money if you’re self-employed and/or ruthlessly cut back expenses to see if you can live solely off of any EI money coming in. The goal is to try to use credit cards as little as possible and avoid pay-day loans at all costs. If you need to use credit cards to make ends meet, so be it. These are unprecedented times. Extraordinary circumstances often require extraordinary measures. My tip to you is avoid if you can and if you must, as little as possible so that when things return to normal, you have a manageable debt load. This means a credit card bill that you can realistically pay back in 6-12 months. I know people will think I’m promoting debt. I’m not. I’m promoting a Debt Harm Reduction plan for those who don’t have any other option.
- If you need to talk this out with someone, get an UNBIASED, FEE-ONLY/ADVICE-ONLY financial planner to work out your plan. There are many of us. We are currently offering 30 minute emergency calls for anyone. You do not need to be a current client. These power-calls are $100 + HST and you can book here.
For SMALL BUSINESS – BOOKMARK THIS PAGE
If you’re Self-employed without payroll account – CERB is there for you. Read above. Also read the CEBA below
If you’re a large institution (Payroll over $1M) – check out LEEFF HERE.
Canada Emergency Business Account (CEBA). Banks will offer $40,000 interest free loans guaranteed by the government for small business (incorporated, partnerships and sole-props). If you repay it by Dec 31, 2022, 25 per cent (up to $10,000), will be forgiven.
UPDATED May 19 – For businesses whose payroll/income between $20,000 to $1.5 million of payroll in 2019.biz you qualify.
UPDATED MAY 19 – For Self-Employed (sole-props) people or people who pay themselves from a corp on a T5 (dividends) you now qualify too with some specific rules:
- You need to have a business operating account at a bank (personal chequing account may not cut it),
- Registered for an HST/GST or payroll number with CRA
- Have filed a 2018 or 2019 business tax return
- Your expenses (eligible, non-deferralable expenses) which is rent, property taxes, sub-contractors, utilities insurance. Basically, things you can’t say “I’m not gonna buy this rn because… pandemic.” Essential bills you MUST pay are between $40,000 – $1.5M a year.
Details to follow on applications. Stay tuned. This link helpful
75% Canada Emergency Wage subsidy and will cover up to 75% of your wages up to $58,700 per employee (Up to $847 a week – this is more than EI or CERB. See below) for 24 weeks. This money will be backdated to March 15 – August 29, 2020.
How to qualify:
Eligible employers: individuals (self-employed sole-props with payroll accounts for employees) and corporations. It’s for employees
You must see a drop of at least 15% of their revenue in March 2020 and 30% for the following months during the Eligible Periods. In applying for the subsidy, employers would be required to attest to the decline in revenue. The PM warned that anyone trying to game the system/falsely use these emergency programs will face consequences. I assume heavy sanctions/penalties etc. So… only use this if you need it is the name of the game. Don’t be a jerk, basically.
What is considered Revenue?
- Calculated using your normal accounting method, and would exclude revenues from extraordinary items. For example, if you had a one-time massive influx, that doesn’t necessarily disqualify you.
- You can chose accrual method or cash method of accounting but cannot use both. You have to pick one from the start and stick with it. Accrual method is where you calculate revenue based on invoices. Cash method is where you calculate revenue based on what cash has actually dropped into your business chequing account.
|Claiming period||Required reduction in revenue||Reference period for eligibility|
|Period 1||March 15
|15%||March 2020 over:
|Period 2||April 12
|30%||April 2020 over:
|Period 3||May 10
|30%||May 2020 over:
How to apply?
You would be able to access the Canada Emergency Wage Subsidy by applying through a Canada Revenue Agency online portal. More details regarding how to apply for the program will follow. If you do not qualify for the Canada Emergency Wage Subsidy may continue to qualify for the previously announced wage subsidy of 10% of remuneration paid from March 18 to before August 29, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.
How it logistically works – you will keep your employees on payroll and they will send you money (even backdated) to help pay for it. It seems like the idea is that you have access immediately to the Canadian Emergency Business Account (the $40,000 interest free loan). Use this to keep payroll going as usual and then repay the loan when the subsidy comes in.
What if you employ yourself and you’re on payroll? Can you use the subsidy?
It looks like it! There’s a special rule for employees (you) that do not deal at arms length with employer (aka you). You’re not at arms length from yourself. You are yourself. It looks like you are eligible for the subsidy for payroll between March 15 – June 6 up to the max $847 per week.
Refund of payroll remittances
There’s talk For greater certainty, employers would be required to continue to collect and remit employer and employee contributions to each program as usual. Eligible employers would apply for a refund, as described above, at the same time that they apply for the CEWS.
COMMERCIAL RENT RELIEF, Canada Emergency Commercial Rent Assistance program will lower rent 75% for April, May and June that have been hard hit by COVID19 if your rent is less than $50,000 a month, you have ceased operations or taken a 70% decrease in revenue from pre-COVID19 revenue. The government (CHMC) covering 50%, your landlord 25% and you 25%! It says “small business tenants” So… that’s great.
i.e. if your commercial lease was $4000 a month. You’d pay $1000, the government would pay $2000 and your landlord would take a $1000 hit. They would collect $3000.
For April, you’ll get back 75% retroactively from your landlord once they get their loan.
UPDATED MAY 20 – THE CATCH? Your landlord has to sign an agreement. Have that convo ASAP. Loans were JUST MADE (May 20) forgiveable. So that’s a WAY better deal for your landlord. It’s only forgivable if they reduce rent.
I have had many people reporting that their landlord doesn’t want to or won’t participate. That sucks. I was so excited to hear about this program and I’m so disappointed that this has the experience of so many small business owners. Write your MP and MPP and tell them about it. We have seen again and again that the programs roll out and then are tweaked to include more people. Hopefully we see more action on this front as well.
In Ontario – THIS IS HELPFUL
If none of these help you – GO HERE and see if you can get regional support!
CALL TO ACTION: ASK FOR HELP/OFFER HELP
Some of you may not have any available debt to pull from, or any emergency savings – if that’s the case for you, is there anyone you can ask for help? Can you offer any type of online service or gift cards for your business to bring in some income during this time? Are there family or friends who can help? If you’re someone whose income is unaffected by COVID-19, are you able to offer financial support to someone right now? We’re all in this together, and the only way we’ll get through this is by helping each other in any way we can. <3
Most people have hear the rule that your monthly housing costs shouldn’t be more than 32% of your gross monthly income, but I’m a bit more hardcore than that. This rule can still lead to House Poor Tragedy.
The reason? It’s calculated on your gross income, which means before tax. Well, 32% of your gross income can translate to between 45 – 55% of your after tax income, just for your house. No food, no debt payments, no toilet paper. Your after tax income is what really matters because that’s the money that hits your bank account. So, stop thinking about your income before tax, and only plan based on what your take home pay!
GOLDEN RULE: Make sure that all of your monthly fixed costs are 50% of your household monthly AFTER TAX income. This means, all housing costs, utilities, debt payments, transportation costs and groceries are only 50% of what you actually take home every month.
If you are a first time homebuyer and this feels too tight, you can push it up, but under no circumstance should you be higher than 60% of your after tax monthly income.
This way, you’re ensuring that at least 40 – 50% of the money that hits your bank account is left over for you to actually save and spend!
Usually, when I see house poor, fixed monthly costs are as high as 80%. This is when there’s no money left over for saving and barely any for fun and consumer debt levels start to climb year after year!
WATCH MONEY AWESOMENESS HERE!
Guest Post to THE LRMC – CLICK HERE TO READ