Managing your finances after job loss

07 June 2021 by National Bank
job loss

As anyone who has ever experienced it will tell you, losing your job can be a challenging time. It raises a lot of questions, especially when it comes to your finances. We’ve put together some advice to help you protect your financial health while you get back on your feet. With your finances secure, you can focus on the next step: seeking out new professional opportunities.

How do I manage my finances while I’m looking for a new job? 

Although it might be the last thing you feel like doing, it’s important to make a budget as soon as you can. If you already have one, think about updating it. Here’s how to do it.

Start by listing your sources of income without your former salary. These might include government benefits, child benefits or your spouse’s income. 

Next, note down your expenses: rent or mortgage payments, loans and interest payments, credit card payments, insurance premiums, phone and cable bills, childcare expenses, etc.

Then add variable expenses, such as groceries, gas, leisure activities and personal care.

Now that you know your total income, subtract your total expenses. If your expenses are greater than your income, think about where you can reduce your spending. 

How do I manage existing debt and avoid getting into debt?

It’s important to avoid adding to your debts. Don’t use your line of credit or credit cards except in emergencies.

Good to know: There are insurance products that cover debt obligations. If you have mortgage loan insurance, check whether it includes job loss protection that will cover your payments at this time.

Likewise, if you have loan insurance or job loss insurance, find out if you’re covered.

Don’t hesitate to ask for help managing your debts. With expert advice, you’ll be able to find solutions tailored to your situation. You don’t have to go through this alone.

Should I use my savings?

If you have an emergency fund or other savings, you may have to dip into them or stop contributing to your savings for a while. Your advisor can help you understand the short-, medium- and long-term impact of these decisions.

They’ll be able to figure out the option that’s best for you. For example, it’s often better to use your emergency fund, your TFSA (because you can put the money back in once you’ve found a new job) or your non-registered investments before touching your RRSP.

What sources of income are available to me?

Here are a few ideas for possible sources of income:

- Severance pay. Depending on the law in your province or territory, you may be entitled to severance pay when you lose your job. Depending on the industry, the federal rules may apply. Some employers will offer more than the minimum required by law. Check your employment contract for details.

Remember that severance pay is taxable and may affect other benefits (like employment insurance). Speak with an expert to see whether you can reduce your tax bill.

- Employment insurance (EI). EI benefits can cover up to 55% of your average insurable weekly earnings. 

Apply for EI as soon as you can. If you delay, you may lose out on benefits.

- Vacation pay. This corresponds to any unused vacation days you have accumulated. 

- The Wage Earner Protection Program. This program may apply if your employer declares bankruptcy or goes into receivership and owes you money.

- Temporary or freelance work. Be aware that this income may affect your entitlement to benefits like employment insurance.

What about my group insurance?

You may have the option of maintaining some of the employee benefits you had with your former employer, such as insurance coverage, for a certain amount of time.

It’s sometimes possible to maintain your group insurance coverage by converting it to personal coverage, at your own expense. You will have to make a decision within a certain timeframe, often 30 days. This option may allow you to keep healthcare coverage. 

What do I do with the financial benefits I’ve accumulated?

Make a list of the financial benefits you had with your former employer and make sure that everything is in order. You’ll probably have some decisions to make about what to do with them. Your list might include the following:

- Share ownership plan (registered or non-registered)

- Pension plan  

- Accrued income not yet paid (sales commissions, bonuses, etc.) 

- Group TFSA

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How do I move forward with my career?

While losing your job may hurt, it can also be a good opportunity to think about what you really want to do with the rest of your life. Here are some questions to ask yourself and some resources to help.

What questions should I ask myself after losing my job?

There are a lot of things to think about. Here are just a few ideas:

- What are your strengths and weaknesses?

- What transferable skills do you have, and what do you want to do?

- Do you want to stay in the same field or change jobs?

- What kind of salary are you looking for?

- Do you want to work less? More? Do you want to work from home?

- Do you want to go back to school? How about setting up your own business?

What resources are available to help me find a new job?

Don’t hesitate to take advantage of job search websites and talk to specialists like career coaches and recruiters. Your former employer may even offer resources to help you find a new position after being laid off. Make the most of them. 

Think about whether you can take advantage of any of the following resources:

- Government agencies and organizations for job seekers. They may offer job banks or information about résumé and cover letter writing and interview preparation.

- Recruitment websites.

- Your personal and professional contacts.

- Networking activities.

- Job fairs. 

Can I get help if I want to go back to school?

Have you always dreamed of being a lawyer, web developer or electrician? If you’re thinking about changing careers, you might need to go back to school. 

Check whether you’re eligible for any loans or bursaries from your province or territory or the federal government. You might also qualify for help from your educational institution.

Another possibility is the Lifelong Learning Plan (LLP), which allows you to withdraw money from your RRSP to finance a return to full-time studies.

If you have a spouse, they can also withdraw the same amount to help you go back to school. 

Although certain conditions apply—like paying back the amounts withdrawn from your RRSP within a certain period—this program could be a good option to help make your dreams of a new career a reality.

How do I start my own business?

Do you like the sound of being your own boss? Why not go into business for yourself? Training, mentoring and support are available to help you get started, and you’ll find plenty of articles and resources online to guide you through the process. 

There are several ways to get into business. In addition to launching a new company, you could take over an existing business or become self-employed.

Although losing your job can be stressful, remember that you don’t have to go through this period alone. By using the resources at your disposal and getting expert advice, you can get back on your feet and overcome this setback. You’ll bounce back from this challenge—and maybe even discover a new career path that’s perfect for you! We're here to answer your questions. 

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