Loss of Income
It's tough not knowing when your next paycheque will arrive. If the loss of income is unexpected, there may be a lot of changes you need to make so that you can get back on your feet. If you've planned ahead for this eventuality, you might have an emergency fund that you can fall back on. Whether it's from a loss of a job, health issues, or a strike, here are some practical ways to get through it.
Apply for benefits now. You've worked hard. You could be entitled to employment benefits, insurance coverage, or union benefits, but there's a waiting period before they start paying out. Apply soon so the benefits arrive before things get really tough.
Handle health issues. If you had a benefits plan through work, see what coverage you continue to have, and when it ends. Find out what your time limits are on submitting benefits claims. It's best to use what benefits you have, rather than paying the full cost later.
Don't be embarrassed. It's common for people to be embarrassed about a loss of income, even refusing to tell those closest to them about their situation. Pride can make you spend money just to hide your troubles. It's better to hold back, and do some planning about how to be good to yourself and others without emptying your accounts.
Check your access to cash. How liquid are your assets? What do you need to do to make money available? If all your money is tied up in a vehicle or other sellable assets, consider which items need to be sold so you are able to pay your bills.
Get financial advice. You will need to make a lot of decisions that will affect not only today, but your future, too. You don't need to make these decisions alone. By talking to your advisor you might be able to delay payments, access insurance coverage, or apply for strike assistance.
Change your monthly budget. If you didn't have a budget before, it's essential you start one now. By knowing exactly where your money is going, you can see what everything is costing - and how you can trim. Reduce your spending by cancelling things that aren't necessary, like cable or eating out. Find savings by changing your car insurance or parking the car altogether. Replace costly activities with the free activities. Overall, look thoughtfully at what you really need.
Find free things to do. Being on lower income can be hard. To make this temporary situation more enjoyable, check out the many free things available in your community. They're easy on your budget, and you'll be able to find new opportunities that may increase your assets.
Minimize your investment contributions. If your budget is really tight, making monthly contributions to your retirement plan may need to be stopped. Check with your advisor. Investing is not a priority when your income is substantially reduced.
Put your credit card away. You may be tempted to depend on your good credit to pay for things now, thinking that you'll easily pay it off later when you're employed again. There's no debt worse than high-interest credit card debt, and paying it off later means compromising your future ability to save for the things you need. You could end up in serious financial trouble.
File your taxes. By filing your taxes, you are making sure you get all the benefits you're entitled to. This includes GST, Child Care Benefits, Old Age Security and a lot more. Your lowered income means you will likely get a return. Also, by filing your taxes you become eligible for grants, bonds and subsidies that you wouldn't be able to access otherwise.
Don't touch your investments. Touching your registered plans or other savings investments carry some steep costs. If you're cutting expenses the right way, it's unlikely you have to touch your investments. If you have any questions about this, see your financial advisor.
If things get tough
When things get really tough, there will be hard choices to make. Here are some things to think about.
Prioritize your payments. You need to pay your mortgage and keep up with your basic utilities. And make sure you can cover your income tax and property taxes. If you are making vehicle payments, consider how necessary your vehicle is to your current situation. Most importantly, don't wait for the bills to pile up before taking action. Rather than waiting for the creditors, talk to your credit holders and make new arrangements. Foreclosures aren't good for anyone, and your financial advisor can show you options that you may not have thought of.
Find temporary income. Having a temporary job can keep you solvent. And you'll get an added benefit of knowing you're taking care of yourself and your family. Although looking for a suitable job is a high priority, you can still arrange a garage sale, do freelance work, take on odd jobs like yard work, and so on. A bit of income is better than none at all.