Suddenly finding yourself without a job can cause stress and anxiety, especially when it comes to dealing with a new financial reality.
While there’s no easy way to survive a job loss financially, there are things you can do that will alleviate some of the stress.Q: I’m about 10 years away from retirement and have been laid off for the first time in my life. The company I worked for went through an ownership change and with the way they reorganized operations, I’m one of a number of guys without a pay cheque for the foreseeable future. The union has warned us that it could be a while before we get called back, or never. I have some savings, but not enough to last for several months or longer. How do I go about surviving the loss of my job? ~RonnyA: A reduction in your income, whether from lay off, an illness or any number of other reasons, is always an unsettling situation. The feelings of uncertainty, not being able to provide the necessities for you and your family, and not knowing when you’ll regain control of your situation are among the most stressful situations life can throw your way. While there’s no easy way to survive a job loss financially, there are things you can do that will alleviate some of the stress.Here’s what you can do if your income has been drastically reduced:The No. 1 mistake most people makeThe one wrong move most people who face a drastic reduction in income make is that they don’t adjust their spending to their new lower income level right away. They continue supplementing their lifestyle with the use of credit and end up creating a financial disaster.Until you know what your actual income will be, e.g. from EI, income assistance, union support or how long your savings needs to last, stop all discretionary spending immediately. I can’t stress enough how important this is. Then outline a budget based on your lower income to give yourself the guideline you need.Cut non-essential costs immediatelyPart of reducing your spending is looking at all of your expenses carefully. Maybe you’ve got an extra vehicle insured, you’ve got a top-tier internet or streaming package or you’ve got online subscriptions that you don’t fully utilize. Think about every cent you spend and aim to cut any non-essential expenses by at least half, if not entirely. Temporarily scale utility and cell phone accounts down to the bare minimum, stop investment contributions, look at automatically recurring expenses on your credit card and bank account statements and put any on hold that can be stopped. If you make a lot of donations, consider giving with your time rather than your resources until you’re back on your feet.Cutting your spending and expenses down as much as you can will help stretch any savings you might have as far as possible.How to Stop Collection CallsReducing expenses is only part of what to doReducing your expenses and how much you spend is only half of the equation; finding ways to supplement your income is the other half. There are a number of ways to earn a little extra cash from one-time infusions to your bank account to ongoing income. Consider if you have anything you can sell, e.g. a trailer, or if you have enough smaller items to have a garage sale. Maybe you have a hobby and can sell what you make through an online forum that doesn’t charge any/large fees, e.g. Facebook Marketplace.Then think about ways in which you can earn ongoing income while you either wait to go back to work or find new work. Could you rent out storage space on your property, take in a student or boarder, or help a neighbour with some child care or yard work. If you’re someone who has been used to working 40-plus hours a week at one job, it can be hard to suddenly generate enough income to survive from various sources. However, the balance between reducing your expenses and increasing your income will hopefully allow you a sense of calm in the midst of the storm.8 Money Mistakes That Keep People BrokeApply for any support or assistance you’re entitled toAdmitting to and asking for help can be a shot to your pride, but don’t let that get the better of you. Apply for any benefits you’re entitled to and let your friends and family know the situation you’re facing. If your loved ones start seeing you struggle, or start wondering why you’ve turned down going out with them for dinner three weeks in a row, and have put off buying your plane tickets for your annual get-away, not knowing will cause more concern than if they know what’s going on.They will likely also want to find ways to help you out. No one likes to see a loved one struggle financially, so from emotional support to making dinner, playing cards, helping with child care or giving you a ride, allow them to be helpful and get by with a little help from your friends.Facing Reduced Income….Now What?Communicate with your creditorsIf you owe money to your financial institution (e.g. overdraft, loan or credit cards) and fall behind on the payments, your bank or credit union can use any funds that you have in your accounts to pay down these debts without notifying you. It can be a good idea to open a new account at a financial institution where you do not owe any money. Deposit any money you receive to this new bank account and move money in your savings account to the new financial institution to keep it safe. Find out more about your banking rights and responsibilities from the Financial Consumer Agency of Canada.Creditors can help you more before you fall behindCommunicate your current situation to your creditors. They are often better able to assist you before you fall behind on your payments. This includes student loans. For more information, review our guide, How to Deal with Creditors and Collection Agencies, or give us a call and one of our Credit Counsellors will review your situation with you.Help! I’m Being SuedThe bottom line on financially surviving a job lossLosing your primary source of income is extremely stressful. Being in debt can make it that much worse. Many people also worry that if they aren’t able to pay their debts, their credit rating will be affected. While that is true, your credit rating will start to recover after you return to work and you are able to make your payments again. In the mean time, take care of the essentials first and avoid relying on credit and getting deeper into debt. Focus on solutions and do the best you can. That is all anyone can ask.Related reading:What to Do Before Reduced Income HappensHow to Pay Off Debt With No MoneyRegain Control of Your Pay Cheque Once the Collectors Start CallingScott Hannah is president of the Credit Counselling Society, a non-profit organization. For more information about managing your money or debt, contact Scott by email, check www.nomoredebts.org or call 1-888-527-8999.