CERB explained

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🇨🇦 Ryan Gauss (@RyanMGauss) | Twitter

This coming Monday, the application portal to apply for the Canada Emergency Response Benefit -CERB- will open.

CRA is already anticipating an overload on the system and has broken down application days by month of birth. The breakdown is here.

The Agency has also provided more details in regards to eligibility. I will kindly summarize them for you.

Some details remain unclear though. I’ll make a note of them too.

Eligibility criteria

To apply, you need to meet ALL of the following conditions:

  • You’re a worker -either employed or self-employed- and your hours have been reduced to zero due to Covid-19
  • You have sustained a total loss of income in the last 14 days
  • You are not expected to earn any income in subsequent periods
  • You are at least 15 years old
  • You reside in Canada
  • You’ve earned a minimum of $ 5 000.00 in 2019; These 5K can come from employment income, self-employment income, EI benefits…They’re not mutually exclusive.

You can’t combine CERB with any other income, except…

The only other income you can receive with CERB is from a province or territory that has implemented support payments in response to Covid-19.

If you are receiving any other type of income, you’re not eligible.

Here is a breakdown for different situations:

Eligible

  • Laid-off because of Covid-19, do or don’t qualify for EI
  • Sick with Covid-19, do or don’t qualify for EI
  • Hours reduced to zero because of virus, either employed or self-employed; do or don’t qualify for EI
  • Taking care of a relative sick with Covid-19
  • Taking care of your children because of schools/daycares closure
  • EI benefits exhausted after March 15th, still not working and earning income
  • Receiving other Covid-19 support payments from province/territory

Not eligible

  • Still working and receiving income
  • No longer working but paid by employer (lucky you!)
  • Employer on wage subsidy program, i.e. paying you
  • Hours reduced but not eliminated, still receiving partial income
  • Job slated to start soon, including students with Summer jobs
  • Receiving any EI benefits: employment, sickness, maternal/parental
  • Receiving pension or income from RRIF
  • Receiving income assistance
  • Receiving disability payments from insurance co. or gvt
  • Students who didn’t have jobs prior to Covid-19
  • Stay-at-home parents prior to Covid-19
  • People who resigned/voluntarily quit job
  • Loss of income/job for other reasons than Covid-19 or prior to March 15th (apply for EI, if you qualify)
  • Unemployed & not on EI prior to March 15th, even if job-searching
  • On unpaid leave of any kind, i.e. not working, not earning
  • Didn’t earn 5K in 2019

As you can see, a lot of people will not qualify for CERB. Many Canadians might be in for a rude awakening.

It’s unclear if you would qualify if a job offer is rescinded due to Covid-19. I guess it would depend on your situation when you accepted the offer.

If you’re eligible for EI, apply for EI first

Technically, you could apply for CERB first, even if you’re eligible for EI. But it’s best to apply for EI first.

It will provide you with benefits for an additional period of time. Once your claim is up, you can then apply for CERB if you’re still not working, and the program is still available.

It’s also unclear whether you will be redirected to Service Canada when applying for CERB and being eligible for EI.

If you have already applied for EI, you don’t need to apply for CERB.

Amount, length and taxes

The amount is a flat $ 2 000/month, regardless of how much you made prior to applying.

It’s available for a maximum of 4 months. You need to re-apply every month.

This benefit is taxable, however CRA will not withhold any income tax.

No documentation required…yet

Upon applying, you only need to certify you meet the eligibility criteria.

However, CRA may ask you for documentation later on. Keep this in mind, particularly if you want to game the system…

Final word

There will be cases that are not listed above. Further clarifications may also be addressed later on. If you apply for CERB, please share your experience by commenting below.

“Here for you” is all relative

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If you live in Canada, you’ve probably received lots of e-mails from your financial institution and other service providers letting you know they are “here for you” in these uncertain times.

I certainly have. I found these messages to be anxiety-producing, to be honest.

But, what does “here for you” actually mean? Perhaps, it’s not what you may think….

Blatant marketing

At the urge of the Federal Government, all 5 Canadian big banks announced they would offer up to 6 month of mortgage payment deferral to the most vulnerable people.

Many other lenders followed suit. Details were sparse, and when pressed for more information said lenders and big 5 refused to elaborate, saying each situation would be evaluated on a “case-by-case basis”.

Case per case basis is also all relative…

CBC has already reported many customers have faced outright denials or ridiculous processes and timelines.

How is that supposed to be helpful?

There is no free lunch

Whether it’s deferring your mortgage, car payment, personal loan or cell phone bill, lenders and service providers are not charities.

I understand you may be in a dire situation and panicking.

However, before you agree to a deferral, you also need to ask the following questions:

  1. How much is it going to cost me? Interests will most likely still accrue during the deferral period. You may also be charged administrative fees.
  2. How will it impact my credit score and file? Lenders could treat the deferral as missed payments on your credit file. Down the road, it will negatively impact you.

Final word

“Here for you”. Honestly, Canadians don’t need platitudes and empty promises. Right now, a lot of us need actual, tangible help.

Coronavirus and your expenses (with a BC twist)

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Pandemic or no pandemic, we all have bills to pay….unfortunately. If, like many people, you are already feeling the pinch financially, let me give you some advice on which bills to pay first and any assistance that might be available to you.

Since I live in British Columbia, I will provide information about the provincial government economical response to Covid-19.

Also, some of the advice I’m about to give is controversial, and may completely go against conventional wisdom. You’ve been warned!

It’s all about prioritizing your payments

When you lost your job or your working hours have been reduced, you can’t keep living the same way than when you were fully employed.

I know it sounds obvious, but many people still live and spend as if nothing had happened. You can’t routinely spend $150 per week on take-out or clothes when you have no, or little income.

# 1. Cut unnecessary payments

It’s pointless to contribute to your RRSP, TFSA or RESP if you can’t pay your rent or your mortgage. Same goes with charity contributions. You need to help yourself first before helping others.

#2. Paying your credit card balances

Like many people, you probably have several credit cards; and like many people you may be carrying a balance on a few if not all of them.

If you happen to have a Line of Credit -LOC-, transfer your credit cards’ balance there. The interest rate on LOCs is lower than the one on credit cards. Most LOCs are also interest-payment only.

Afterwards, only use 1 credit card for your purchases. It will limit the number of monthly payments.

If you don’t have a LOC, check if one your credit cards offer a 0% interest transfer or a low interest one. Many credit cards give their customers the possibility to transfer balances from other credit cards with 0% interest for 3 or sometimes 6 months.

Afterwards, only use 1 credit card for your purchases. If you can keep using the one you transferred balances on, it’s even better. You’ll only have one payment to make.

If you are in a dire situation, only make the minimum payment. It will keep your accounts current, while buying you some time.

# 3. Paying rent

Unfortunately, renters are the forgotten of the Federal Government financial package.

If you live in BC, a moratorium has been implemented on both evictions and rent increases. In addition, renters can claim up to $ 500/month. That amount will be paid directly to landlords.

Your rent is definitely the one payment you really need to make. If need be, you may take money from a LOC or a credit card to do so. You need a roof over your head!

# 4. Paying the mortgage

If you are an owner, you have a few more options. Many lenders offer options to skip payment or take a “mortgage vacation”. Contact your lender directly. Note these options are not free. Interests will still accrue.

This is also a payment I suggest you try to make as much as possible.

Should you be unable to make payments, it will take months before your lender takes action. Foreclosure proceedings take well over a year.

# 5. Paying for daycare

In BC, the provincial government is picking-up the tab for licensed day cares and private, family ones. It means you don’t have to make payments and your child retains her spot.

I don’t know about other provinces. If there is no disposition, negotiate with your provider. Ask for reduced fees since you’re not using the service.

# 6. Paying other bills

Hydro: BC Hydro is no longer disconnecting service for non-payment. In addition the corporation has a crisis fund to assist customers who can’t pay their bills. Other provinces probably have dispositions as well. I wouldn’t worry too much about that particular bill.

Car lease/loan: I’m afraid you may not have many options here if you can’t pay. Call your lender or dealership. If it’s a possibility and as a last resort, you may need to part with your car. Either sell it, or if have a lease, obtain a buy-out. In BC, repossession is not automatic and usually takes months.

Cell phone/cable/internet: It will also take a few months before your provider disconnects services and/or send your account to collections. Telus is no longer disconnecting at the moment. Many providers also offer payment plans. Don’t worry too much about this bill.

Student loans: the federal government has suspended both payments and interests for the next 6 months. The BC government has done the same.

Strata/ HOA fees: it will also take months for your strata to go after you on these.

# 7. What about income taxes?

If you’re entitled to a refund, file now.

If you owe money, defer until June 1st and pay by August 31st. CRA is no longer charging interests for late payment.

Conclusion

Don’t get me wrong. I am not suggesting you default on all your payments, or that you let your home be foreclosed. What I am suggesting however, is that you buy time if you are in a dire situation.

Don’t beat yourself up if you have to use credit to pay for your bills, or if you have to miss some payments in order to keep a roof over your head and food on the table….

Coronavirus and your income (or lack thereof)

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UPDATE: the 2 benefits previously announced by the Federal Govt have been combined into one: Canada Emergency Response Benefit or CERB. More info here .

As we are in uncertain times worldwide, many Canadians are already feeling the pinch, financially. Last week alone, Service Canada registered about half a million new EI claims. Many people are also in quarantine.

I thought it would be a good idea to summarize the different options available in Canada for everyone impacted by the pandemic.

# 1. I lost my job/was laid-off

If you have lost your job due to a shortage of work, you need to apply for EI as soon as you have your Record Of Employment -ROE-. All applications are done online, here. Do not visit a Service Canada office, as the employees cannot process your application manually and will send you home.

In order to qualify for EI benefits, you need to have worked a minimum of hours. That number depends on your province of residence.

If you’re not sure you qualify, apply anyway. Service Canada will get back to you either way. Don’t bother calling them at this stage, you probably won’t get through. Just saying.

A few years ago, the entire EI application system was moved to automatic processing. It is pretty straightforward and fairly fast, about 1 week. The Federal government also waived the 1-week waiting period, so all new claimants will be paid an extra week.

The only caveat to this is if your application can’t be processed automatically. If it has to go through a manual review and approval, you will need to be patient as it could take a few weeks before you hear anything.

#2. I lost my job but don’t qualify for EI

You’ll have to apply for the Emergency Support Benefit. Applications open in April. At the time of writing, no information is available on eligibility. All we know is that Canada Revenue Agency will manage the program.

#3. I am self-employed and had to temporarily close my business

If you’re self-employed, you won’t qualify for EI, even if you are registered to the special benefits for self-employed people program.

You’ll have to apply for the Emergency Support Benefit. Applications open in April.

#4. I am sick with the virus and in quarantine

If you have short-term disability insurance via your company benefit plan or you are paying for it yourself, apply with your insurer. You will definitely need a doctor’s note, but it’s best to apply for short-term disability rather than sick benefits under EI. It will be quicker, and the amount paid to you will be higher than EI.

If you don’t have such insurance, apply for EI sickness benefit here. This benefit is also available to self-employed people registered to the special benefits program.

Both works for any sickness, BTW.

If you don’t qualify for sickness benefits, you’ll have to apply for the Emergency Care benefit. Applications also open in April. At the time of writing, no information is available on eligibility. All we know is that Canada Revenue Agency will manage the program.

#5. I have to stay home to take care of my children or a relative sick with the virus

You’ll have to apply for the Emergency Care benefit. Applications open in April.

# 6. I’m having a baby!

Congratulations! Stay safe. When you stop working, apply for maternity and parental benefits here. You’ll need your Record of Employment -ROE- and to have work a minimum of hours to qualify.

This benefit is also available to self-employed people registered to the special benefits program.

You’ll also be eligible for the Canada Child Benefit -CCB-.

Final word

There are definitely options for almost everyone. As you can see, however, you have to apply to receive financial assistance. Nothing is automatic.

Service Canada advises not to wait to apply for benefits. If you wait for more than 4 weeks, your claim may be denied.

Coronavirus: Canadian economy edition

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In light of the pandemic caused by the coronavirus, the Canadian government announced an unprecedented economic package to help as many Canadians as possible during these turbulent times.

It is unprecedented, indeed. Even in during the Great Recession of 2008, the measures implemented were nowhere close to what we’re seeing now. This crisis was actually much more severe than the current one.

Many people -whether experts or not- are decreeing the world is in recession, but it’s actually too early to make that call. In economy, a recession is a temporary period during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

We’re not there yet, folks.

This pandemic is not going to last forever

Like all the ones we’ve had before -and we’ve had a few!-, it will stop at some point. It’s usually a matter of months or a little over a year, at most. Let’s look at the previous 2, most recent pandemics:

  • H1N1: Apr 2009- Aug 2010
  • SARS: Nov 2002-July 2003

As you can see, they didn’t last for years. Right now, China is at the tail end of the coronavirus pandemic. At the time of writing, this country hasn’t reported any new cases for the last couple of days.

Anyhow, let’s go back to the crux of this post:

Canadian personal finances

As I was saying above, the federal government announced a list of extended measures to help Canadians:

  • Removal of the 1-week waiting period for all new EI claims
  • Emergency Care benefit: for workers who don’t have paid sick days, don’t qualify for EI and have to stay home to care for their family or themselves -$450/week for up to 15 weeks-
  • Emergency Support benefit: for anyone who doesn’t qualify for EI and lost their job or had to temporarily close their business -$450/week up to 15 weeks-
  • Tax-filing deadline has been extended to June 30th, with payments to be made by Aug 31.
  • Boost to the Canada Child Benefit, up to $ 300.
  • Additional GST rebate, amount unknown at this stage
  • 6-month moratorium on federal student loans
  • Lower amount of mandatory withdrawals for RRIF holders

For businesses:

  • Deferral of tax payments until Aug 31
  • Wage subsidy: up to 10% of an employee’s pay, maximum 25K per employer
  • Ease of borrowing through BDC and EDC
  • CRA has also suspended its audits and re-assessments on businesses

Something for almost everyone

This has to be one the most comprehensive program I ever seen in Canada. It’s pretty extended.

However, many details are still blurry at this stage. We don’t know what will be required to qualify for these various programs. Both the Emergency Care and Support benefits are not available yet. Applications will open on April 1st.

It is also expected it will take a few weeks for claimants to actually start receiving money. That’s when an emergency fund comes in handy!

Unfortunately, our most vulnerable population is excluded from these announcements….It may fall on provincial governments to handle -and pay for- them.

Many banks, as well as CHMC, have also committed to helping people who may have difficulties with their mortgage payments. The details are also unknown and will probably be on a case-per-case basis.

We’re definitely not sure of how long this coronavirus will linger and the depth of its economic, health and social impact.

However, we will get through this, the same way we got through previous pandemics, economic turmoils and recessions. The world is not going to end! In the meantime, keep calm and carry-on…..

Don’t trade on the news: coronavirus & your money

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The last couple of weeks have been turbulent market-wise. Fears of the coronavirus and its impact on the Chinese economy sent markets into bear territory worldwide.

My own portfolio lost between 5% to 10% over that period. And I don’t really care. Yes, you’ve read correctly. And, yes, you also guessed that I didn’t sell any of my stocks, and don’t plan to at this stage. Why? because I don’t trade on the news….and you shouldn’t either.

Debunking misleading, false information

A lot has been said and written about this Novel coronavirus or Covid-19. For true and accurate information, I invite you to check the World Health Organization website.

I just want to make the following comments:

  • At the time of writing, the number of cases worldwide sits at just over 93 000. It will most likely increase. That being said, the world’s population sits at just over 7.5 billions. It means only 0.12% of the world population is infected….and 99.88% isn’t.
  • At the time of writing 3 199 people died from Co-vid 19. This will likely increase too. It means about 3.5% of the infected people died…and 96.5% will recover -a lot already have-.
  • Should we be careful and take basic precautions? Definitely.
  • Should we stop living our lives? Definitely not!

Keep calm and carry on, financially

The main economic issue with Co-vid 19 is that it started in China. China is the 2nd largest world economy. It has been at a stand still since January. Of course, it will have a ripple effect worldwide. China manufactures the majority of goods we consume.

It’s way too early to predict a global recession. There are a lot of factors that can trigger a recession. A coronavirus is not necessarily one of them, nor is it the only one.

This is definitely not a reason to sell all your stocks and rush to buy bonds or gold. By doing so, you would probably loose a lot of money.

I previously mentioned this, and I am going to do it again: as long as you’re not actually selling your stocks, you are not losing or making any money.

Bear markets are normal and are to be expected. I’ve also mentioned this before.

A little secret…

The most successful investors are the ones who don’t try to time the market – no one can!- and the ones who actually buy more stocks in a bearish market. The silver lining of a bear market is that stocks tend to become more fairly valued or undervalued.

Because we’ve been in a bull market for so long, a lot of stocks are currently overvalued, i.e. expansive.

What if you can’t keep calm?

If you find yourself in panic-mode over the last financial news, you may want to take an honest, serious look at your risk tolerance. You may also want to review your investment objectives.

In my opinion, holding stocks in a portfolio should reflect a more long-term objective, such as retirement. If you invest in stocks, you shouldn’t need that money for at least 5 years, unless you’re a day trader. If you are, this post is not for you :).

The best way to weather a stormy market is to do nothing drastic or impulsive. Keep in line with your objectives and risk-tolerance.

In other words, keep calm and carry on….

Return since inception vs. yearly return

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I recently received my December statement for both my RRSP and TFSA portfolio. This portfolio is for retirement purposes only, therefore I don’t plan to draw from it until I retire.

As an information, its breakdown is as follow: 75 % equities, 20% bonds, 5% cash. Its geographical allocation is predominantly North American, but I have made efforts to diversify as much as possible, and also have investments in Japan, Europe, China and emerging countries. The equity portion of my portfolio is across pretty much all sectors.

Disclaimer: I am not a Financial Adviser and the above information is just that. Information. You should always do your own research before deciding on how and where to invest your hard-earned money.

Back to my returns, my RRSP return for 2019 was an astonishing 22% and my TFSA’s was 19%.

I didn’t let these numbers dazzle me

Why, you may -rightfully- ask.

Well, first of all, these returns are only “paper-returns”. What I mean by this, is that these returns are unrealized. In order to actually “bag” those numbers, I would need to sell my entire portfolio.

Remember, as long as you haven’t sold, you are not actually making or losing money.

Secondly, these returns are only for one point in time, aka 2019. 2019 has come and gone.

So what number to look for instead?

Look for return since inception instead

Return since inception simply means return since you first started your portfolio. Most brokerage firms will give you that number, the same way they give you monthly and annual returns.

Returns since inception take into consideration all time-periods, as well as the associated market fluctuations. I find that number to be more realistic than a monthly or yearly return.

Returns since inception don’t tell the whole story either

Actually, none of the various rates of return ever do.

As a time-weighted return, the return since inception doesn’t take into considerations any movement within your portfolio such as withdrawals and contributions.

For that, you need to look at your money-weighted rate of return.

And also keep in mind that any return rate never accounts for inflation or taxes, making it further complicated to figure-out your real rate of return….

My year in review

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2019 was definitely one of my most powerful years to date. I recall having only 3 other like this in my life so far: 1999, 2000 and 2006.

These 4 years all have 3 points in common: they involved extensive travels, they were definitely not the most lucrative and I was the happiest ever.

2019 confirmed my long-held belief money doesn’t equate happiness. Happiness is not something you can buy on any stock exchange….

Let’s briefly move back to the end of 2018. I was really not feeling well at that time. I felt stuck. I felt disconnected. I even felt like I had very little to no options for my life! I am not sure how I came to feel that way.

Although I had made some much needed changes earlier on, such as switching to part-time work and starting my MBA studies, it was not enough.

I needed something more “drastic”

My university happens to have a campus near Kuala-Lumpur, Malaysia. I decided to apply to study for a semester there and was accepted.

Early January, I took a 19-hour flight to get there and didn’t look back until mid-April. To write that I thoroughly enjoyed myself is an understatement.

Being away from my usual environment for an extended period was exactly what I needed. I met great people, tasted some of the best food ever, visited 8 countries and learned a lot.

More importantly, I reconnected with myself

I hadn’t felt that way for a very long time.

The disconnection I felt with others was stemming from a disconnection with myself. Since my return, I haven’t had this intense feeling of loneliness that I used to have, and that I couldn’t understand.

That doesn’t mean I don’t feel alone from time to time. I manage my aloneness better than my loneliness.

I finally quit my soul-killing job

This took me some time however. I actually went back upon my return from Malaysia. I needed some income, and I also needed to figure-out what I wanted to do next.

A few weeks back in, I realized coming back was a mistake. At this stage, I wasn’t learning anything new; there was nothing beyond my current position, and the working environment was so dysfunctional that it was no longer sustainable.

I quit at the end of September.

I became self-employed again

Once I decided to quit my job, I started looking for another, but my heart wasn’t in it. Deep down, I knew that I wanted to become my own boss again. So, I did just that. Click here if you want to know more about what I do.

I also became clearer on what I wanted

I certainly don’t have everything figured-out, but I am definitely more clear about what I want as well as what I don’t want.

As a result, I am not so stressed-out all the time, and I have also eliminated a lot of energy vampires from my life, whether being activities, things or people.

I have options

And it’s a nice feeling! It’s liberating too.

Traveling to a couple of third-world countries where I saw extreme poverty gave me a better perspective, and reminded me how privileged I am. I needed that too!

I was so engrossed in my first-world problems that I couldn’t see the forest behind the one tree I was obsessing about.

Money is not the answer to all problems, questions or prayers

I am not saying money is not important. It kind of is. But having money will not solve all your problems, nor will it turn you into someone you’re not. It won’t make you a better person either.

So what does 2020 have in store? Well, I don’t know. I am not a fortune-teller. I have decided to take each day as it comes, from now on.

Avoiding Christmas financial madness

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For many people, Christmas lingers for months and months after it is gone. Marketers do an excellent job of making us spend our money on items we neither need nor want.

With Christmas a mere 4 weeks away, it is not too late to avoid the “January Financial Hangover”. If you haven’t planned anything, now is the time to:

  • Prioritize: a short deadline will help you zoom-in on who and what is important to you. If you have a partner and/or kids, talk about what you want from the Holiday Season.
  • Get creative, instead of spending money: if you have a talent for baking, cooking or for crafts, what about using it instead of buying prepared food and gifts? You can also donate your time.
  • Buy your Christmas ornaments at the dollar store, or if you are creative, make them yourself.
  • Send e-cards instead of paper cards.
  • Skip the whole gift-buying altogether: This one can be tough. There is a societal expectation you “have to” give gifts for Christmas. I suggest the following experiment: ask yourself and your loved ones (partner, kids, parents, siblings..) what were their gifts last Christmas. I bet most of them -including you-won’t remember.
  • Be honest: honesty is the best policy. If you can’t afford to spend money or don’t want to participate in a gift exchange, say so. Learning to say no is an important skill. Too often, people want to keep appearances and keep up with the Joneses.  If you are doing this, you are not doing yourself any favor.

As I indicated here, I have no problem being a bit of a Financial Grinch over the Holidays. I have never gone into debt for Christmas and don’t plan to.