Even though the unemployment rate in Canada reached record lows in 2022, certain industries experienced mass layoffs in 2023. For many, losing your job means more than losing your paycheque and benefits. Whether it is unexpected or not, you leave behind colleagues that have become friends, routines you’ve gotten used to and, of course, stability.
Making ends meet in our current economic climate can be a challenge with a steady job, let alone for those experiencing job loss. If you or your partner have recently experienced unemployment and are wondering what’s next for you financially, we’ve pulled together a step-by-step guide to managing your finances as newly unemployed.
Step 1: Review your savings and create a budget
Having a budget is always important, but it becomes critical after a loss of income. Unless your partner can support you both, there will need to be changes made to your spending and saving habits. If you were the sole provider, or live alone, you may need to make more drastic changes.
Start by laying out your essential expenses, like housing, food, utilities, transportation, childcare, and medication. While doing this, consider non-essential expenses you can put on pause such as vacations, restaurant dining, paid entertainment, and hobby shopping. Once you have cut your budget down to necessary expenses only, then it’s time to check your savings and severance package to figure out how much money you have, if any, to bridge the gap between jobs.
Using this new information, ask yourself:
- How long can you cover your expenses?
- Can you live off your severance for some time or do you need to dip into your savings?
- Will you need to apply for unemployment assistance?
- Will you have to take on more debt to make ends meet?
Mapping out your budget and expenses will help manage your financial stress by guiding your timeline for getting back to work.
Step 2: Figure out how long it will take to find a new job
While the average length of unemployment in 2022 was 19.6 weeks, the amount of time an individual is unemployed will depend on a variety of factors such as location, job type, experience, and the labour market.
One of the toughest parts of job searching is not knowing how long it will take. It’s important to remember that you have skills and talents new employers will be interested in. When you are ready to start looking, take an afternoon to do a self-reflection on your accomplishments, update your resume, research new positions, and network with potential employers.
It’s also important to take time to get over any shock or grief from your past job and find a job that is the right fit for you. However, keep your unemployment budget (as outlined above) in mind, as the longer you wait, the more you may be required to dip into your savings or take on more debt.
Step 3: Consider unemployment assistance
Government assistance programs, such as Unemployment Insurance (EI) provide temporary income support to Canadians who are able to work but cannot find a job, due to a shortage of work, seasonal employment or mass layoffs to name a few examples.
EI will pay you a percentage of your previous income, up to a certain amount. It is suggested to apply for EI as soon as you stop working to ensure the benefits start as soon as possible. Delaying your claim for more than 4 weeks after your last pay may result in losing available assistance.
Step 4: Know your options
According to the Office of the Superintendent of Bankruptcy Canada, 48% of those who filed for insolvency in 2021 sited loss of income as their top reason for financial difficulty. For those with little to no savings, high debt and/or unmanageable financial obligations, a job loss can be the final straw.
Losing your job is an emotional experience, and a stressful one to face alone. It’s important to get support from the right professional to help you understand your options. If you or your partner have lost your job and are struggling to meet your financial obligations, we are here to help.
At Grant Thornton, we offer judgment-free, 30-minute consultations to help you find the best path to debt freedom. Book online, or call us today at 1-844-4GT-DEBT to start your path to a brighter financial future.