It was the first good economic news in a while.
Statistics Canada reported a gain of 35,900 jobs in April, surprising analysts who had expected the agency to report that 50,000 more people had been chopped from the country’s payrolls.
The good news was muted, however, by the fact that the rise in the number of jobs created was due mostly to people becoming self-employed because they had given up looking for full-time work.
Losing a job is not something most people look forward to, but unfortunately it happens, particularly during bad economic times like these.
“You’ve got to look at it from three different perspectives,” said Murray Pituley, director of estate planning and taxation with Investors Group.
“The first is how to prepare yourself in the event you do lose your job. The second is what to do when it happens, and the third is how to be proactive once it has happened. Having the right coping mechanisms in place can ensure you keep your personal and financial goals on track.”
Pituley advises everyone to have an emergency fund of up to six months in cash or liquid assets to cover expenses in the event they lose their job unexpectedly.
“Each family (person) should look at their situation individually — where do they live, what industry are they in, and do some advance planning,” he said. “Create an emergency fund and shave costs where you can. This should be a normal part of a financial plan.”
If you do lose your job, there are a number of things you should do right away. Get information from your employer about any severance package as well as your pension plan, if you have one, and any company benefits that you might be able to take with you when you leave.
You may have options with what you can do with your pension.
You may be able to leave it where it is, transfer it to a new employer, or move it into a locked-in registered account.
Also, find out if your pension is indexed to inflation and if there are other guarantee provisions, such as last survivor rights.
There are tax implications to how severance packages, or retirement allowances as they’re sometimes called, are handled.
If you’re eligible, you may be able to roll over some of your allowance into your RRSP, even if you don’t have any contribution room.
As well, you may be able to arrange to spread your allowance over several years or instalments, which can reduce the amount of tax you pay over time.
“You want to make the right choice, so do your homework,” Pituley said. “Sit down and find the options that are best suited to your lifestyle.”
Then take a snapshot of your finances. Determine your sources of income, such as unemployment insurance, your spouse’s income or any part-time work you can do to bring in extra income.
Also look at your expenses. Keep a log of where you spend your money.
You just might find there are areas in your life where you can cut back.
Prioritizing your debt is another important step to take.
If you can, pay off debt with the highest interest rates, such as credit cards. You may be able to consolidate your loans at a lower rate and, with rates at historic lows, it may make sense to renegotiate your mortgage.
“Gather as much information as you can about your assets, income and expenses to get a clear picture of your financial position,” Pituley said.
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors. He can be contacted at email@example.com.