The global pandemic has impacted almost everyone’s finances. Even if you and your spouse have remained employed through the duration of the lockdown, investments have been affected by the earlier stock market crash. If your income has been affected as well, you might be struggling to keep up with costs and meet debt obligations.
When you’re facing major obligations, but you have savings, the question becomes: should you tap into investments to cover emergency expenses due to the pandemic? The short answer: if you can avoid it, no.
Financial Advice During Coronavirus
There are other supports and relief measures in place that can help you meet expenses and debt obligations due to the unprecedented nature of the COVID-19 pandemic. There are professionals such as certified Credit Counsellors from non-profit credit counselling agencies who can offer free financial advice if you’re struggling.
Non-profit credit counselling agencies like Credit Canada have been providing free phone consultations allowing people to get essential financial advice while maintaining physical distancing and they can also offer debt consolidation services. Debt doesn’t stop even in a pandemic, and acting earlier is always a better idea. If you’re looking for debt help, Credit Canada offers support during the pandemic.
What Are Creditors Doing About the Crisis?
With so many people experiencing lost income – and with no end in sight – some creditors have proven flexible. Banks have offered mortgage deferrals for those affected by COVID-19 and cut interest rates on credit card loans.
Credit Counsellors from non-profit credit counselling agencies can keep you up-to-date on what creditors are offering and how you can talk to them about getting that help. There is help out there, you just have to find out what it is and how to qualify.
Why You Should Find Relief Before Tapping Investments
#1 You Lose When You Sell Low
The markets still haven’t recovered from their highs earlier in the year and it is likely still in recovery mode. One of the biggest mistakes you can make is selling investments after a crash, because you miss out on the crucial recovery that restores value to your portfolio.
#2 You Fall Behind
By drawing on retirement savings like an RRSP to pay down debt or cover expenses, you risk not having enough when you want to retire. It can be tough to catch up on retirement savings, and you miss out on a lot of growth by cashing out.
Using emergency savings is another issue. That money isn’t earning as much (or anything) in interest. It can be a smart decision to pay off debt with those funds if you have them.
#3 There Are Other Ways Out of Debt
Finally, there are other ways out of debt that don’t involve cashing out investments. You could access options like a debt consolidation loan or Debt Consolidation Program. Through these mechanisms you can reduce interest rates on unsecured loans and debts. That means lower monthly payments and a faster path out of debt.
There are other forms of debt relief that can help you through this crisis. Find out what your options are before using last resorts.
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