It can be difficult to figure out what to do with your finances if you suddenly lose your job. Getting laid off from work can be a challenging time. A sudden drop in your income can cause a serious budget crunch. By taking action you may be able to avoid long-term financial difficulties. Here’s what you can do to minimize the financial impact of a layoff.
Assess your current money situation
Carefully examine your finances after a layoff. Hopefully, you’ve planned for this and have an emergency fund you can draw on while looking for a new job. Don’t forget to take RRSPs, credit cards, severance, lines of credit, and items you can sell into consideration. While dipping into your retirement savings or going further into debt is a last resort it’s good to compile a full picture.
Once you have looked at what money is available it’s time to compile a list of all your money obligations. be sure to include all your debt (especially credit card) balances.
Create a Layoff budget
Money management is going to be key while looking for a new job. The budgeting process takes on a whole new level of importance during times like these. Check your expenses and see where you can cut costs to leave money for important things. Good places to look are any underused subscription streaming services, eating out, and excess phone costs. Also, if there are any payments going out for things you can live without, look into pausing the payment.
Set saving money aside
Take a break from your regular savings schedule to free up some extra funds. Place the money you would put into your RRSP (or other long-term savings) into a regular savings account. This ensures that if there comes a time you need the money it’s available to you. On the other hand, if you don’t end up needing it you can simply transfer it into your long-term savings. Just make sure you start to rebuild your savings once you have more cash flow.
Sign up for government benefit programs
The Government of Canada offers programs to help those that have been laid off. The most common are:
- Employment Insurance (EI). EI can cover up to 55% of your average weekly insurable earnings. Apply for EI right away. You might miss out on benefits if you wait.
- The Wage Earner Protection Program. This may apply if your employer files for bankruptcy or goes into receivership and owes you wages, vacation pay, termination or severance pay.
It’s worthwhile looking into any provincial programs you could be eligible for as well.
Is your severance package fair?
It’s your right to receive a fair severance package. What’s considered fair depends on a variety of factors including, your salary, length of employment., and reason for layoff. To get a better idea of what is fair in your particular situation be sure to review these sources:
- Your employment contract
- Your union contract
- Federal and provincial laws
- Employee handbook
Income to be considered in a severance package includes:
- Your salary
- Anything else you would have received
Depending on the company you may receive a lump sum payment or a pay continuance. Either way, it’s important to be aware of tax implications.
Contact lenders to see if you can negotiate your terms
Talk to your creditors if you’re worried about your ability to pay upcoming bills. Many lenders and banks have relief policies. You first need to tell them about your situation. Then make a request to have loan and credit card payments, interest, and fees halted. Also, look into lowering your monthly service fees with your phone and cable providers.
Find part-time work
Many websites can help you find job opportunities. A quick internet search will bring up a ton of resources.
Part-time jobs, like temp jobs, can give you a sense of stability and a way to supplement your income. They can also be good for your mental health because you won’t feel as isolated when working with others. there’s also the possibility that being out around people may help bring about your next long-term job opportunity.
You may already have insurance that will help you manage your finances while unemployed.
It could include:
- Mortgage payment protection insurance
- Credit card balance insurance
- Credit and loan insurance
This optional insurance usually covers your mortgage, credit card, or loan payments. To temporarily cover your payments, you can file a claim with your insurance company. This applies in the event of your death, illness, or job loss.
Carefully go over the terms and conditions of your policy.
If your employer offers medical insurance, they may offer you the option of moving from a group plan to an individual plan. Depending on your health and overall financial picture it’s worth considering making the switch. More often than not, if your finances allow for the moving to an individual plan it’s recommended that you go ahead.
While going further into debt should be seen as a last resort, getting a short-term loan with low-interest rates is an option to consider if you need money right away. It makes sense to do this while you’re still officially employed and your credit score is strong. Just make sure you do the math and check to see if the interest rate they’re offering is something you can afford.
Once you’re back on your feet, make sure your debt doesn’t sit around gaining interest. minimize the impact on your finances by having a plan in place to pay off your loan as soon as possible.
If things start to get really tight, you might want to think about getting help from people around you.
Food banks and shelters for the homeless are all there to assist those in need. A food bank is available to everyone, so you don’t have to be without a home to use it. A food bank can help you save money for rent and other essential expenses, even if you have some savings.
Still make time for fun
You can give yourself some time to recover from a job loss by taking a short break. Even if it is only for a few days or a weekend.
Recovery is the first stage. In those first few days, don’t make any big decisions and don’t rush into the job market the day after you hear the news. You need some time to process what happened and how you feel about it.
After taking some time to process, it’s time to strategize and make daily efforts toward your new job.
Being in a good state of mind will always go far when it comes to job searching. That’s why, while it’s important to put a lot of focus and effort toward finding employment, it’s also important to take time to do things you enjoy. Find cost-effective things you can do to destress during what can be a very stressful time.
Manage your anxiety
Getting laid off can have a negative impact on your self-esteem. Even if you take comfort in knowing most people face layoffs at some point, it can still be shocking when it happens. It is normal to feel rejection and uncertainty.
Take full advantage of any severance services your former employer provides, such as career, financial, and stress counselling.
Make sure you eat well, get enough sleep and exercise. All this helps you keep a positive outlook and have the energy you need to get that next job!
It is stressful to face an unexpected job loss or financial difficulty. The steps outlined above will help make managing this process a little easier. Taking charge of your personal finances is one way you can get in the driver’s seat of what comes next for you.
Feeling overwhelmed by finances because of a layoff? Talk to one of our expert Credit Counsellors to see what we can do to help.