A job loss can test your money management skills, especially if it’s unexpected. After all, bills still need to be paid, and basic expenses need to be covered even when your income changes. Creating a plan for staying on top of your finances while you’re in between jobs can make a stressful time easier to bear.
How to survive financially after a job loss
If you’ve lost your job or anticipate a layoff is coming soon, acting quickly can help minimize the financial fallout. These money management strategies can help you stretch every dollar while looking for a new position.
1. Collect your last paycheques or severance pay
Once the shock of losing your job wears off, it’s time to confirm any final payments owed to you by your employer. That can include your last paychecks and any payouts you might be owed for bonuses, unused sick leave or vacation time, and severance pay.
2. Apply for EI benefits if you’re eligible
Employment Insurance (EI) benefits provide money to people who have lost their job through no fault of their own. If you think you might qualify, you’ll want to apply for benefits immediately, as delaying could cause you to lose them.
3. Assess your financial situation
Once you’ve received your final pay from your employer and applied for EI benefits, you should have a better idea of where you stand financially. Specifically, it helps to know how much money you have in savings and what alternate sources of income you might have, including government benefits or severance pay.
4. Revisit your budget
If a job loss drastically reduces your income, you may need to reduce your spending by the same amount. You can start by separating your essential and nonessential expenses in your budget and cutting out anything you don’t absolutely need to spend money on to maintain a basic standard of living. From there, you can work on trimming down other areas of your budget and finding ways to save money on basic expenses, such as meals or utilities.
5. Seek out alternative income sources
Searching for a new position might be your top priority if you hope to return your income to where it was before the job loss. In the meantime, you can also explore other ways to generate income. For example, you might start walking dogs or cutting grass. Or you may get a part-time job at a local restaurant or retail store. Anything extra you can bring in can help ease some of the financial burdens until you’re back in a full-time role.
Keep calm and carry on financially
Feeling worried or anxious about your financial situation when the unexpected happens is normal, but it’s important to focus on what you can do about it. Learning different money management strategies and exercising patience can help you feel more resilient and in control.
You can also use a tool like NOMI to make budgeting through a job loss easier so you can focus on what matters most: getting back to work.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
