Reducing Financial Stress: What Are Your Options?

If money’s tight and your financial stress is high, you have options to help.

The past few years have been tough on Canadians financially. The pandemic, inflation, fears of a recession, rising interest rates, job losses, political unrest and more continue to cause financial stress. Knowing how to access your savings is becoming as important as choosing where to invest.

One of the best things to do during times of economic uncertainty is to stay invested. However, that’s not an option for everyone. If you need some options to ensure you can pay your bills for essentials, here are two things you can do:

1. Reduce your spending and contributions.

Cut back on your spending on non-essentials.

Why? It’s simple and frees up cash for essentials, without disrupting your savings. The major downside is having to give up guilty pleasures.

Pause or reduce your savings. This could also mean fewer tax deductions and could get in the way of meeting your retirement goals.

Look into your life insurance options; you may have some flexibility in paying your insurance premiums or have access to a cash value.

However, you can’t take this decision lightly, as some options aren’t reversible. And there may be tax implications you need to consider.

Earn some extra money. Have you been thinking about starting a side hustle? Now might be a good time. Just be careful of tax implications; your extra income might push you into a higher tax bracket.

2. Make smart withdrawals or access your cash.

Your TFSA withdrawals aren’t taxed. Your subsequent year contribution room increases by the amount of the withdrawal.

You can make RRSP withdrawals.

While your RRSP is designed for long-term savings, you can make withdrawals earlier if you must.

However, you do run some risks of early withdrawals, such as negatively affecting your ability to reach your retirement goals; and could be subject to tax (including withholding tax).

If you’re in retirement, you must withdraw at least the government-mandated minimum each year. However, there’s no cap on how much you can withdraw. But you need to consider the downsides to this option:

Withdrawals up to the minimum amount aren’t subject to withholding tax. You may have to pay tax depending on total income you report at the end of the year.

You can borrow from a personal loan or your credit. This is an option to consider only if you’ve exhausted all other options because you will be charged interest on the loan. You may need to pledge assets as collateral and might impact your credit rating.

Regardless of how much income you have, we can help you:

• Make well-informed decisions
• Help you make a roadmap that meets your long-term goals
• Feel assured in times of uncertainty knowing you’ve taken steps to prepare
• Avoid making emotionally-driven decisions about your savings

Bough & Associates Financial Solutions Inc. | 613-937-0489 | rachel.bough@sunlife.com