Can working from home help get you out of debt?

The COVID-19 pandemic has meant a lot of changes for Canadians. Our everyday lives have been upended. How we work, shop, and interact with others has changed significantly. We are starting to see a return to something resembling pre-pandemic “normal” in many parts of Canada — but there is still caution, uncertainty, and unease. The implications of the recently discovered “Omicron” COVID-19 strain are as yet unclear.

Employers and employees have faced considerable challenges figuring out how to continue to deliver safe and timely service to their clients and customers. In the essential-service space, many employees still had to physically go in to work, while many non-essential workers were able to work virtually from home.

For many, the prospect of working from home was daunting. First there were physical and technological hurdles to overcome. Having a furnished workspace, equipment, software, and internet bandwidth were all prerequisites. There was a learning curve associated with new software and new virtual procedures. Then there was the social element. Staying connected, communicating in meaningful and timely ways, and avoiding a sense of isolation became important. And there is the issue of productivity — would employees working from home be as productive as they had been when they commuted to an office location? (The answer to that question, in general, appears to be ‘yes’).

By January 2021, approximately 32 percent of Canadians aged 15 to 69 worked most of their hours from home, compared with only 4 percent in 2016 (Mendhi & Morisette, 2021). The number of employees that spend at least some of their working hours working from home continues to rise. What seems clear is that even post-pandemic, many workers would choose to continue to work from home if they can, at least part-time.

The pandemic has had some unanticipated financial benefits. Overall, most Canadians found they were able to save money. The average savings rate jumped from 1.3 percent of disposable income in 2018, to 14.9 percent by mid-2021. In April, May, and June of 2020, the savings rate peaked at about 28 percent. The reasons for this are clear. Government support programs helped shore up Canadian incomes. Coupled with this, pandemic restrictions limited people’s ability to purchase non-essential goods and services. Recreational spending was considerably reduced, and a sort of forced budgeting occurred.

In addition, Canadians who worked from home found that they were able to save a significant amount of money by not having to travel to a work location each day. Commuting costs were reduced or eliminated, including fuel, vehicle maintenance/repairs, bus and parking passes, etc. Spending on a work wardrobe was less important. Restaurant food costs were reduced as many people started making lunches at home from less expensive groceries. Parents of younger children found that they no longer needed before or after school childcare as they are now home at the beginning and end of the school day. In addition, some tax deductions are available to those working from home. Altogether, the financial benefits of working from home are significant. For a lot of Canadians, the savings equated to getting a raise — more income was left each month for other things.

For some, pandemic savings gave them a chance to get their debts under control. Equifax Canada reports that overall, credit card balances are down, and fewer people are behind on their credit card payments (Equifax Press Release, May 27, 2021). With some diligence, it’s possible for people to significantly reduce their personal debt load using the working-from-home savings they have found, resulting in even more savings in the long run through reduced interest charges. Our ability to reach our debt reduction goals will depend to some extent on what we learned during the pandemic — that a lot of what we spent our money on pre-pandemic, we can do without.

Of course, not all Canadians are able to work from home and benefit from those potentially debt-reducing savings. Others entered the pandemic with overwhelming debt, and pandemic savings, however significant, will have only a minimal impact on their debt load. For these people, the pandemic postponed the need to deal with their debt problem, but now that the pandemic is approaching an end, government support is being reduced or eliminated, and creditors becoming less sympathetic, a real life-changing debt solution may be needed. In situations such as this, it may be time to consult with a Licensed Insolvency Trustee at MNP. We will review your options, let you know the risks and benefits of each, and help you find the best-fit solution to your debt problems. The consultation is free of charge; you have nothing to lose, but the debt.