Experiencing job loss or a career change in Canada can be a distressing experience. Those who have been through this unfortunate situation can confirm that unemployment is often worrisome and filled with doubt, especially regarding money. When facing job loss in Canada, you must exercise discipline when structuring and managing your finances.
This article strives to assist you in evaluating your financial situation, generating a budget, and finding new ways to make money. It also addresses organizing your expenses and debts, reducing unnecessary spending, and eventually, planning for your new future.
How do I quickly assess my personal finances?
Even with Statistics Canada data showing a continual upward employment trend, it is essential that you evaluate your finances after a job loss in Canada. Having a clear understanding of your financial situation requires you look at your current income (if any), expenses, and debts. This initial assessment helps determine what you will need for necessities and where you'll need to cut spending.
The consequences of job loss can be significant. So it is important to immediately assess your personal finances as soon as it happens. Taking steps to manage your finances responsibly can help you stay calm and in control while looking for a new job.
How do I evaluate my income, expenses, and debts?
- Step 1 – Collect and organize financial documents: Gather all necessary financial information. This can include bank statements, credit card records, utility bills, and mortgage and loan documents.
- Step 2 – Calculate your income: Add up all sources of your income. This will give you an idea of what you have to work with (beyond available credit).
- Step 3 – Identify your necessary monthly expenses: Make a list of all monthly expenses including rent or mortgage payments, utilities, average grocery bills, etc.
- Step 4 – Identify your unnecessary monthly spending: Unnecessary expenses are also called discretionary expenses. Review your spending for date nights, refilling your wine fridge, or any other “fun” spending. Add up the three-month total for each type of expenditure. Divide this number by 3. You now have your monthly average spending amount for that expense. Take the time to do this for all types of expenses, even if you end up with a “Miscellaneous” line item.
- Step 5 – Triage your debts: Make a list of all of your debts. Calculate the total amount you owe. Prioritize paying down high interest debts first. Be sure make minimum payments on everything else to maintain your credit score.
- Step 6 – Create and follow your new budget: Based on your income, expenses, and debt, make a budget that reflects your financial priorities. Now put all that effort to great use!
Tips for creating a budget that you can stick to
Review and adjust your budget regularly. Like everything in life, things can change.
Canada's economy is currently facing high inflation rates and the Bank of Canada was forced to implement interest rate hikes. Higher interest rates means borrowing money costs more so Canada is currently an expensive country to live.
If you lose your job, it is essential to keep track of spending. Here are some ideas to help you save a few dollars while managing your money.
- Ensure you list all of your expenses. There is no sense in creating a budget that missed a $103 monthly payment for your Peloton.
- Prioritize your spending. If you can live with just necessities, you might be able to save and invest while looking for a new job.
- Use a budgeting app to track your expenses compared to the limits you set. Intuit Mint is a great one!
- Review and adjust your budget regularly. Like everything in life, things can change.
- Avoid impulse purchases. Yes, you don't have a job. No, you shouldn't be buying off the Home Shopping Network (or online) at 3:00 am.
- Reward yourself for sticking to your budget
How can I find new sources of income?
When you have to look for a job or find a new career, you have to come up with ways to make money quickly to keep up with living expenses. The following are some potential sources of income.
Termination or severance pay
Your employer may provide you with a lump sum of money if they terminate your employment without informing you in advance. This is commonly known as severance pay and it can be a useful source of immediate income if you're fired, laid off, or made redundant. The payment is normally paid out on the spot on your last day of work. If you were fired for cause, you may not be entitled
Salaried employees are entitled to a payout for unused vacation days. However, those who are paid by the hour typically will receive a percentage of their annual earnings. This percentage is usually between 4-6%, as vacation pay. If you have not used your vacation hours or days, you can cash them out.
Use Your Savings
Use the money you already have to pay for your day-to-day costs instead of relying on borrowing and accumulating debt while you are job-hunting. If you have a financial cushion set aside for emergencies, this is a good time to use it.
Employment Insurance (EI)
EI can be a helpful resource if you've lost your job, providing a portion of your income for a limited amount of time. It's important to apply for EI as soon as possible after becoming unemployed, since it may take a while for benefits to start.
Claiming credit and loan insurance benefits
Your insurance policy may offer assistance with managing your monetary responsibilities while you are unemployed. It could potentially include different kinds of coverage, like:
- Credit card balance insurance.
- Mortgage payment protection insurance.
- Credit line and loan insurance.
This kind of insurance is usually optional, and it will pay out money to cover payments on loans, mortgages, or credit cards. If you experience unemployment, illness, an accident, or death, you can file a claim to your insurance company to help with expenses while you can't make the payments.
Wage Earner Protection Program (WEPP)
This program can help you if your employer is facing financial difficulties and owes you money. It applies to those who have been laid off and are owed wages, holiday pay, severance pay, and other related payments.
Freelance work or side business
If you find yourself out of work in Canada, freelancing is a viable option for making money with your skills and expertise. Keep in mind, though, that taking on this type of work may impact your eligibility for benefits like EI.
Strategies for finding new job opportunities
Here are some other strategies that you can use to find new job opportunities in Canada.
- Networking: Reach out to your connections and attend industry events. You never know what job market someone else has an “in” with.
- Online job boards: Search for job opportunities on sites like LinkedIn, Indeed, and Glassdoor. These are the major sites but there are a lot of specialized job boards available.
- Company websites: Check for job openings on the websites of companies you're interested in.
- Recruitment agencies: Use an agency to help match your skills and experience to job opportunities.
- Cold emailing: Directly reach out to companies with a professional email expressing your interest in related available positions.
- Employee referral programs: This is a win-win for both parties. Ask current employees at companies you're interested in about job opportunities. They'll luckily receive a bonus if you're hired!
Remember to stay positive and persistent. The more proactive you are (e.g., putting yourself “out there” for employers to find), the better chance you'll find new employment.
How do I manage my debts and expenses if I lose my job?
When changing jobs or careers in Canada, you must manage any debt responsibly and try not to take on any more. It is also a great idea to look into what insurance you may carry. Policies might include mortgage insurance loan job loss insurance.
If you are struggling to manage your debt, don't hesitate to seek help from professionals who can provide tailored solutions. You do not have to go through this alone.
Negotiate with creditors and apply for debt relief
If you have been laid off and are left in debt, you can get assistance for your debt worries. There are ways to handle your creditors.
First, get your finances in order; obtain all the relevant debt information and create a list of all outstanding debts. This list should include the creditor, the balance owing, and interest rate. This information will help you understand your situation better.
Next, reach out to your creditors and attempt to form a deal that will benefit both parties. Positive outcomes could include reducing the monthly bill, lowering the interest rate, or agreeing to a payment plan. If you are faced with multiple high-interest debts, you might consider debt consolidation. A consolidation loan merges all these payments into one larger loan with a lower interest rate.
It could be beneficial to consult a specialist in debt relief, like a credit counselor or a certified insolvency trustee. Debt relief professionals help you find solutions. They can also communicate with your creditors on your behalf and build a repayment plan for what you owe.
Consulting with a debt relief expert can enable you to make an informed choice. But consider the advantages and disadvantages of each debt relief option before making a decision.
How can I cut back on spending?
These are practical strategies to help limit spending and lower expenses during times of job loss or career transition.
- Budget a fixed amount for weekly miscellaneous expenses and only spend that amount.
- Stick to a groceries list and avoid trips to the mall or online shopping.
- Use cash or debit cards instead of credit cards to control spending. Consider reducing the credit limit.
- For big purchase, wait twenty-four hours before you complete the transaction. This approach gives you time to fully consider your purchase.
- DIY, cook at home, look for sales, and eliminate unnecessary expenses.
- Use energy efficiently and opt for eco-friendly transportation.
- Find budget-friendly entertainment options like movie nights at home and nearby vacations. Also, enjoy the great outdoors (it's usually free!).
Planning for the future
Even if you lose your job, the world doesn't stop. This is a fact. You must continue to plan for the future.
How do I save for emergencies and long-term goals?
Building up a reserve for emergency situations and long-term ambitions is vital for Canadians. Having an emergency fund serves as a safeguard against unforeseen circumstances. Putting away money for the future helps to accomplish financial objectives like retirement, buying a house, or paying for schooling.
By consistently putting away money, you can develop better financial habits, guard against the decreasing value of your money (inflation), and avoid high-interest debt. Overall, saving is a significant part in managing money successfully and achieving financial freedom.
How do I build an emergency fund?
Here are some strategies for building an emergency fund in Canada.
- Set a realistic timeline for building your fund.
- Determine what you can contribute to it each month.
- Automatically transfer this portion of your income into a high-yield savings account designed for emergency funds.
- Cut unnecessary expenses and redirect the money saved to the fund.
- Use any unexpected sources of income, such as bonuses or tax refunds, to grow your emergency fund more quickly.
- Make saving for your emergency fund a priority.
How do I save for retirement?
The following are some great (basic) tips for saving for retirement.
- Start saving early. The earlier, the better.
- Determine your retirement goals and how much money you'll need.
- Include your retirement savings contributions in your monthly budget (which you should already have).
- Consider opening a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP) to take advantage of tax benefits.
- Set up automatic contributions to your retirement savings plan.
- Spread your money across different types of investments to reduce your risk. This is called hedging.
- Work with a financial advisor to create a personalized savings and investment plan.
- Reassess your plan annually and make necessary adjustments.
Remember, the key to success is to start early, make regular contributions, and stay disciplined.
It can be difficult to cope with job loss or a career transition in Canada. This fact is especially true with such high living costs. Nevertheless, by evaluating your finances, establishing a budget, seeking out new ways to make money, and cutting back on nonessential expenses, you can gain control of and manage your money.
Understanding your financial situation is key. Make a budget that works for you by keeping track of your income, expenses, and debts. Various sources of financial assistance are available, including termination pay, vacation pay, severance pay, EI, and more. Utilizing these resources can help to make the managing your finances after job loss in Canada just a bit easier.