Managing Money Stress as a Tradesperson

Feast and famine is the financial rhythm of the trade: flat out and flush in summer, then frozen ground and an empty diary in January. The single most protective habit is building a cash buffer during the busy months so the slow ones do not become a crisis. If money worry is keeping you up at night and tipping into despair, you are not alone, and there is free help. For the worry itself, see Mental Health in Construction; for the debt, the bodies below cost nothing to call.‍‌‌​​​​​​‌‌‌​‌​‌‌‌​‌​‌​‌​​​​‌‌​‌​‍

Why the trade is a cash-flow rollercoaster

Several things stack up to make money lumpy and stressful for self-employed trades:

• Seasonal work. Many trades all but stop when the weather turns, yet the bills do not.
• No regular EI for the self-employed. A self-employed carpenter who cannot work in January because the ground is frozen gets nothing from regular Employment Insurance for that gap. Regular (layoff) EI is only for employees. You can opt into EI special benefits for sickness and parental leave, but not for a seasonal slowdown.
• Slow payers and holdbacks. Money you have earned can sit in someone else's account for weeks. A 10 percent holdback can be released only at the end of a job.
• Tax and GST/HST that is not yours. The GST or HST you collect belongs to the CRA, and a chunk of your profit is owed in income tax and CPP. Spend it and the shortfall hits all at once.

Build the buffer first

A cash buffer is not a luxury; for a seasonal trade it is part of the business. Aim, over time, for three to four months of personal and business running costs set aside.

• Pay yourself a wage. Open a separate account, sweep money into it through the busy months, and pay yourself a steady amount year-round from it, even when work is quiet. This smooths the income out and stops the summer windfall from disappearing.
• Ring-fence the CRA's money. The day a payment lands, move the GST/HST portion and a set percentage for income tax and CPP into a separate account. Treat it as already gone, because it is.
• Use a TFSA as the winter buffer. A Tax-Free Savings Account lets you pull money out in the lean months and top it back up in summer with no tax cost (see RRSP, TFSA and FHSA for Trades).
• Diversify the season. Indoor renos, maintenance retainers, snow-clearing contracts or a service arm can carry the quiet months.

When the debt is already here

If you are behind on payments, the worst thing you can do is go quiet. Talk to the people you owe and get free, regulated help early.

• Credit Counselling Canada is the national association of non-profit credit counselling agencies. Its members give free or low-cost budgeting help and can set up a Debt Management Plan with your creditors. Find a member agency through creditcounsellingcanada.ca.
• A Licensed Insolvency Trustee (LIT) is the only professional federally licensed to administer a consumer proposal or a bankruptcy, and the first consultation is normally free. A consumer proposal can settle debts for less than the full amount over up to five years, with no interest, and stops collection calls. Find a trustee through the Office of the Superintendent of Bankruptcy.
• Be wary of "debt relief" ads. For-profit debt settlement firms charge fees for what a non-profit credit counsellor or an LIT can do, often better. The regulated routes above are the safe starting points.

Talk to the CRA before they talk to you

If you cannot pay a tax bill, phone the CRA. They will almost always agree to a payment arrangement, and interest is far cheaper than ignoring it. Hiding from a tax debt only makes it grow.

Common mistakes

• Treating GST/HST as income. It is the CRA's money passing through your account. Spending it builds a debt you will not see until the return is due.
• Riding the credit card through winter. High-interest debt taken on in the slow months can swamp the next busy season. Build the buffer instead.
• Going silent on creditors. Lenders and the CRA have far more flexibility for someone who calls early than for someone who disappears.
• Letting money worry fester alone. Financial stress is one of the biggest drivers of poor mental health in the trade. It is a reason to reach out, not to push through.

Spotted something wrong or out of date? Email us at hello@kilnguides.co.uk.

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