We know what you’re thinking, what do you mean budget for a lay off? Who can really anticipate being laid off? You’re absolutely right. What would you do if you unexpectedly lost your job? How would you survive and make ends meet? Sure, we don’t like to think of the worst case scenario but wouldn’t you rather be better safe than sorry?
Being laid off can come extremely unexpectedly and in Canada, employers are only required to give one week of pay for every six months you’ve worked there for a severance package. If you are one of the few people out there who has been in your career for a dozen years, this isn’t a bad deal, but today most people change their career on average 10-15 times throughout their career.
What’s even scarier is that experts estimate that it takes on average one month to find a new job for every $10,000 in salary you’re looking for. So for example, if you’re looking for $60,000 it could take up to six months. Not to mention that you can’t count on what the job market will be at the time you are laid off.
So how do you make sure you’re prepared financially for an unexpected lay off? Here are some things to keep in mind.
Apply for employment insurance
Employment insurance (EI) is available for those that have been laid off without reason (aka you can’t have been fired for something you did). Hopefully EI is not something you’ll ever need, but there is a reason that you pay taxes every year and EI is a service you can depend on when you unexpectedly find yourself unable to work or without a job.
It’s hard to determine exactly how much you will get on EI but it’s dependent on how much you were making at your job before you were laid off. The maximum is 55% of your average insurable weekly earnings, up to a maximum of $51,700 (as of 2018). This means you could receive a maximum of $547 a week approximately.
Reevaluate your budget
It’s time to take a hard look at your budget because it’s likely you’re going to have to make some changes until you find a new job. Even if you don’t feel it’ll take you long to find something new, it’s important to reevaluate your budget no matter what, because if it takes you unexpectedly longer than expected than you’ll want to be prepared.
Take a look at what you’re spending money on, where you can cut back, and what your income will be (on severance or EI). Some places you may want to look at cutting back, aside from unnecessary purchases, are: your gym membership (maybe there is a trial you can do elsewhere or a cheaper plan available), groceries (be smarter with what you’re buying), and your phone and internet bill if there are cheaper options available.
Find part-time work
If you are looking for a full-time career, but still need to make ends meet, consider part-time work temporarily or even freelance work if you’re in a field that you can offer your services out to people. The one thing to keep in mind when making somewhat of an income from elsewhere is that EI will take this into consideration. You can only make a certain amount before they deduct a certain amount of your part-time earnings off your bi-weekly payments.
Being laid off is a part of life that can come unexpectedly and hit you like a ton of bricks. However, being prepared and knowing what to do in this situation can be incredibly valuable, even if you feel you have job security. If you can, start an emergency fund now for unexpected changes in your life like a lay off. This way you’ll have a back up plan if things don’t go as planned.