Real Talk: Sudden job loss

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Death. Divorce. Job loss. Sometimes tough stuff happens. Unfortunately, these not-so-great milestones often come with a financial impact. So, what do you do if you have to get a divorce? Or if a loved one suddenly passes away? Or if you find yourself with more debt than is comfortable? In our series, Real Talk for the Tough Stuff, we’ll tackle some of these situations head-on with the honest financial advice you need to get through and get on with life. 

Next up, Real Talk for the Tough Stuff: The Sudden Job Loss Edition.

There’s no way around it—losing your job feels awful. Whether you’re living paycheque to paycheque, or you have savings to fall back on, losing your steady source of income can impact your life and packs an emotional punch. But there’s no need to panic. With a little bit of planning, there are steps you can take to manage your budget and ensure you’re financially prepared to take a breath and figure out your next move. 

We spoke with Lisa Purchase from Leading Edge Credit Union for some honest advice about how to manage financially after the sudden loss of a job.  

The first thing to think about—once you recover from the initial shock— is to ask about a severance package. This includes the pay and benefits some employees are entitled to receive when they leave their place of work. Severance pay acts as a nice financial cushion for the near-term, and depending on the circumstances of your termination, you may qualify. From there, it’s likely that employment insurance is an option. Depending on what you were making previously, this could be a significant pay cut—but that doesn’t mean you can pull the plug on loan payments, mortgages, and other important bills. 

“The last thing we want is for you to lose your credit”, says Purchase. “Sit down with a financial expert and work out a plan together. It might seem tedious, but start by mapping out your monthly expenses and making a budget.”

Once you’ve identified all of your key costs, it’s time to look at where you can find some wiggle room. Purchase explains there are ways to take the pressure off when it comes to your loan payments. “Let’s say you have a loan payment of $600 bi-weekly. If you aren’t able to cover that while on employment insurance, your financial institution can set you up with temporary interest-only payments. And if you’re in a mortgage, we’ll always ask if you’ve purchased job loss insurance.”

Even when things are tight, it’s important to keep your credit in decent standing. Having a poor credit score can impact your ability to make decisions and purchases down the road. By decreasing your loan payments, you can keep your credit rating in check until you have a new job, or are feeling more financially stable. Until then, look at all of the ways you can make budget adjustments. Can you scale back your cell phone plan? What about other non-essential expenses like entertainment and eating out?

“Don’t stretch yourself so much each month that you can’t afford your debt payments”, says Purchase. “We always want to make sure clients have cash flow and that their debt ratio is manageable.”

Scaling back is never easy, but with a few lifestyle tweaks, and little advice from a financial expert, you can make it work while you figure out what’s next.