So the worst has happened. Or is about to happen. Either way, it’s looking more than likely that job loss is imminent, and as a result, there goes your source of steady income. Rather than panicking, there are a few concrete steps you can take to make sure you keep your finances manageable and in order even when you no longer have a steady income.
This is easier said than done, but the most important thing is not to make any rash decisions (especially where your finances are concerned). While it might be tempting to immediately try to pay off and close any open lines of credit, you’ll only be shooting yourself in the foot. You’ll be spending valuable (limited) income on an expense that is not immediate, and if you need to open a new line of credit later on while still unemployed, banks will turn you down immediately.
Get to Know Everything about Your Finances
Make sure you understand exactly how much you’re actually making a month, and where it’s going. Understand and scrutinize every bill and every payment. Look at your online transaction history to see how much you’ve spent and on what. Once you have a complete grasp on what you’re actually spending every month, you can start to downsize and cut costs.
Start with the extras (cable bill, take out, expensive coffees in the morning) and do your best to either eliminate them or significantly reduce costs. Sit down with your family and discuss what all of you are okay with cutting and what things absolutely cannot be compromised on (the Internet, for instance, is a must have if your children are in school. Your Netflix subscription not so much).
Prioritize your Bills and Lower your Large Payments on Credit Cards/Loans etc
The thought of having to pay your bills even when you’re no longer earning any money is terrifying. That’s why it’s important to prioritize based on importance, and then work your way down the list. Your top five should be a) your mortgage or rent, b) utility bills, c) food, d) insurance and e) medicine.
That being said, you want to at least the pay minimum amounts on your credit card bills/lines until you can afford to pay more so your credit score doesn’t take a nosedive. If you know you won’t be able to make your payments, call your creditors before your credit score takes a nosedive and see if you can come up with a temporary agreement to lower your payments until you’re back on your feet again. They’ll appreciate you being upfront and contacting them before there’s a serious problem.
Now is also a good time to stop paying into your retirement plan. You can go back to investing a certain portion of your earnings when you have a steady income again. For now, it’s important to focus on making sure you have enough money to last for the next few months.
Have Emergency Funds
This is more of a pre-emptive tip for people who suspect their job might be in jeopardy, but do your best to set aside emergency funds. Whether it’s in a separate bank account or in cash, make sure you have something set aside to keep you and your family fed and clothed no matter what.
Stay on Good Terms with your Previous Employer
If you can, do your absolute best to keep in touch with, or at the very least, leave your previous job on the best terms possible. When you eventually do find a new job, chances are you’re going to need their recommendation anyhow. Also, you never know what unexpected surprises might come up later. If your boss had no choice but to let you go due to downsizing or changing management, they might be able hire you back under contract (or even help point you in the right direction of finding another job).
Even if you’re not sure that you’re going to lose your job, start applying for other jobs as soon as possible. It’s better to have to be in the position where you have to turn down a job than it is to be stuck with no other options.
Apply for Government Benefits Immediately
Don’t let pride or embarrassment delay you. It takes time to start receiving your EI money, and the sooner you get the process started the better. Don’t forget, you’ve spent years paying into the employment insurance fund with your taxes. You are absolutely entitled (and expected) to benefit from it when you find yourself in the position to.
Tell your Family (Yes, Even your Children)
Yes, it can be difficult and embarrassing, but you absolutely should tell your partner and children that you’ve lost your job. You don’t have to go into specifics, but at the very least let them know that you won’t have as much disposable income and that you as a family will have to cut back on some things.
The temptation not to tell your children can be strong, but kids are smarter and more intuitive than you think; They’ll know something’s wrong and build up the worry in their minds. Talk to them, and maybe even use the opportunity to educate them about financial responsibility as well.