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7 things to do following the loss of a job

15 January 2019 by National Bank
7 things to do following the loss of a job

The loss of a job may result in disbelief, stress, and uncertainty for the future, in addition to financial repercussions.  It is important to act quickly. Here are 7 steps to minimize the impact.

1. Determine which of your fixed expenses are affected by your job loss

Since the loss of a job puts an end to your regular paycheque, a usually stable and recurring inflow of cash, the following financial elements require attention.

The rent or the mortgage

If you are a tenant, you need to keep making your full rent payments on time to your landlord. You can try to make an arrangement with the landlord for your upcoming payments, as an addendum to your lease agreement.

If you own your property and have a mortgage loan or line of credit, you are responsible for keeping up your payments, as defaulting on payments or being in arrears may have a negative impact on your credit score and your mortgage renewal. Contact your mortgage advisor if you need advice.

Loans and other commitments

If you have one or more loans (personal, RRSP, car, and so on) or a line of credit, you also need to make sure they are reimbursed according to the agreed-upon terms of payment.

As for your other financial commitments, such as taxes owed the government or a financing agreement for the purchase of home furniture or appliances, contact your lenders to discuss possible arrangements to modify your terms of payment.

Savings and investments

If you have a savings account or savings plan, such as an RRSP, TFSA or RESP, into which you make regular contributions, it is possible to stop your payments (certain conditions may apply, depending on the type of investment) or reduce the payment amounts (the minimum amount being $25 per cycle).

Consult your investment advisor to provide an overview of your situation and how your job loss may affect it.

2. Make a budget and trim non-essential expenses

It will be useful, even necessary, to make a budget for the coming month and the three months after that.

List all current income streams, besides your former salary, such as government benefits, family allowances, your spouse's income, etc. Also consider other possible sources of income (refer to the section below).

Next, itemize your fixed expenses: these include rent or mortgage payments, loan and interest payments, credit card payments, insurance premiums, telephone and cable fees, child care fees, and so on.

Finally, list your variable expenses, such as groceries, gas, leisure activities and personal care.

From your total income, deduct your fixed and variable expenses to determine your residual budget. List the non-essential expenses you can cut down on and keep a daily log of your spending to help you stick to your budget.

3. List any projects for which you've already incurred or planned expenses

Make a list of the projects you've already begun or planned, and the expenses already incurred or planned, such as the purchase of airline tickets for a trip or supplies for home renovations. Because you've made a budget, you now know what you have in available funds and it will be easier to decide if you need to pay those expenses, postpone or cancel them.

4. Stabilize and protect your debt

You want to stabilize and protect your current debt in order to avoid overindebtedness. As much as possible, refrain from using your line of credit or credit cards, and using them only in an emergency as a last resort.

Some insurance policies offer debt protection. If you have mortgage default insurance, see if your payments are covered in case you lose your job and while you are unemployed. The same applies if you have loan insurance or involuntary unemployment insurance: see if your policy covers you in case of job loss.

5. Consult an investment advisor

Book an appointment with an expert who can assess your financial situation and work with you to find concrete solutions, such as getting your finances under control, putting some payments on pause, and so on.

6. Set aside emergency funds

Having emergency funds will give you peace of mind and help you deal with unforeseen circumstances without sinking into debt or taking out high-interest loans. The emergency funds should be sufficient to cover about three to six months' worth of expenses.

Putting aside a realistic sum of money on a regular basis, such as through systematic saving, is a good way to get there.

7. Consider other sources of income

While waiting for a new job to come along, find other sources of income. These may differ according to how your job ended: layoff, permanent layoff, dismissal, etc.

  • Generally speaking, you are entitled to severance pay from an employer if you lose your job involuntarily, after your employer has given you a notice of termination of employment.
  • If your employer failed to give you a notice of termination prior to terminating your job, you are entitled to a compensatory indemnity, calculated according to your seniority and the number of days' notice you should have received.
  • You should also receive vacation pay. This represents 4 to 6% of your annual wages, calculated according to the duration of your uninterrupted service for your employer.
  • If you are not responsible for your job loss, you may be eligible for employment insurance benefits. The amount may be as much as 55% of your weekly average insurable earnings. Note that as of January 1, 2018, annual benefits have been capped at $51,700, or $547 per week.
  • Should your employer have filed for bankruptcy or been placed under receivership, you may be entitled to an indemnity under the Wage Earner Protection Program.
  • Finally, you can find temporary or part-time employment, or work as a freelancer. However, this will affect the amount of employment insurance benefits you receive.

Above all, take some time to step back and calmly assess your situation. Remember that by implementing a solid action plan, you will regain a sense of control over your finances and find the peace of mind to keep looking for a stimulating new job.

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