While there isn’t a one-size-fits-all answer to managing your expenses after losing your job, we’ll walk you through a way of approaching your own finances so that you can make empowered decisions for your next career move.
Begin by creating a plan for your money, or revising the one you already have. A "plan for your money" is a budget, also known as a spending plan.
Many people we see at Credit Canada Debt Solutions come to us and say something like: “I’ve lost my job and now I’m falling behind on my payments. What should I do?”
For general information on budgets, you can check
When we look at a budget under these circumstances, there are mainly two variables we look at - income and expenses. Obviously, in the event of a job loss, income has taken a hit.
First of all, don't worry. You will get through this, and you're probably going to find an even better job. But in the meantime, things might get a little tight, financially, so here's what you need to do in between jobs.
Your first task is to see how much of that income can be replaced, and if so, when it will start coming in. If you're looking to replace your income and you're eligible for Employment Insurance (EI), your very first stop is Service Canada to apply and start the process.
In a perfect world, it would be nice if your previous income could be replaced immediately, but unless you’re very fortunate, this isn’t going to happen. And as a result, your expenses will need to be cut to balance out your finances.
If you don’t have enough money coming in to cover all your expenses, you’re going to have to cut some costs.
Expenses can be separated into three separate categories:
Fixed expenses are usually once-a-month costs, and include items like rent, utilities, insurance, and so on.
Variables generally occur more often than once a month – typical examples are groceries and gas.
And Occasional expenses include things like car repairs, dental work and birthdays.
You should try to sort out your actual expenses into these three categories, and while you're sorting them out, ask yourself the following:
It’s not our position to tell you what your needs and wants are; this is something you have to decide for yourself. But you must set your priorities. Ideally, you should be looking for the low-hanging fruit in your expenses – these are expenses that can be cut or eliminated with the least impact on your life. For most people, getting rid of optional luxuries happens first, followed by habitual and impulsive spending.
Here are some examples of what you might cut based on the expense categories we previously discussed:
If all reasonable options for increasing income have been looked at, expenses have been examined and cut backs have been made, the next step is to look at your assets and debts.
Assets – the things you own – present two ways of getting cash: selling them or using them as collateral to borrow more money.
If you have no assets, your only option is to cut back on your debt payments. The good news is this can be done without damaging your credit.
If you want to cut back on your debt payments without the damage, you can consider applying for a consolidation loan. The main purpose of this loan is to stretch out your debt payments over a longer period of time, and thus have a lower, more affordable monthly payment for right now.
If you've gotten this far but you still don't know what to do, it's a good opportunity to seek help from
As a minimum, a credit counsellor should be able to examine your situation, inform you of the consequences (present and future), as well as suggest a possible solution.
It's important for you to know that, if needed, there are trained and accredited professionals whose job is to examine a client's finances and explore options for dealing with problem debt.
To speak to someone right now, call: 1 (800) 267-2272
Or, request a callback from one of our certified credit counsellors. It's free.