How to get out of debt when income stops flowing
For most Canadians the thought of job loss is frightening. And if you’re carrying high levels of consumer debt, that thought can become downright terrifying.
Unfortunately for countless workers in Alberta and Saskatchewan, the current oil slump in Western Canada may turn these debt fears into a full-out financial crisis.
According to a recent report from TransUnion, the downward trend of world oil prices is leading to significant job loss in Canada’s oil-dependent provinces which could potentially lead to a sharp increase in credit card delinquencies in Alberta and Saskatchewan.
The study found that:
- Consumers in both Alberta and Saskatchewan could expect sharp increases in credit and loan product delinquencies in the coming quarters;
- Saskatchewan could potentially see a double-digit increase in delinquency rates;
- While Alberta could see as much as a 60% increase in some areas;
- A drop in oil prices causes lower oil sector investment, which in turn leads to higher unemployment and lower consumer disposable income; and
- As a result, consumers tend to have a lower ability to service debt.
The potential for significant job loss in Western Canada is worrisome for, Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada.
“Losing a job is a frightening situation for anyone. But when you’re in debt it is even worse,” says Schwartz. “A loss of income is a stressful situation. Not knowing how to make ends meet or where to find the money to pay bills can lead to a debt trap that can last for years.”
“We hope Canadians have been heeding our advice for years, and working to build an emergency fund,” adds Schwartz. “But if you’re already living paycheque-to-paycheque, a loss of income can easily lead to a debt disaster.”
To help workers affected by the oil slump and all Canadians facing potential job loss, Schwartz and the team at Consolidated Credit offer these tips to drill yourself out of debt when your income stops flowing:
Apply for EI. One of the first steps you need to take when you have lost your job is to apply for Employment Insurance benefits. The majority of Canadians employees and employers pay into EI benefits, and now is the time to take advantage of this program. You may or may not qualify, but it can’t hurt to apply anyways – and remember, it takes time to begin receiving payments so apply early.
Track and prioritize spending. In order to make your emergency budget work in your favour, it’s essential to track and prioritize your spending. Write down how every cent is spent. Prioritize your bill payments (mortgage or rent and utilities should be at the top), and recognize where your discretionary spending can be trimmed.
Contact your creditors. Pick up the phone and talk to your creditors as soon as possible. Explaining your job loss to your creditors could result in some immediate relief. Creditors are more likely to negotiate payment terms and interest rates when you are upfront about your financial situation. Alternately, they may not be as forgiving once you’ve missed a payment or two.
Raise cash. When your struggling just to get by, it is important to find other sources of cash flow. This could mean selling household items that you don’t need or getting rid of a second vehicle if you can get by without it. If you’re crafty or handy, consider promoting your services to make extra cash while you search for a new car. Sites like CraigsList and Kijiji often have ads for handymen, seamstresses, yard work and babysitting services.
Ask for help. When you are holding multiple debts with a number of different creditors, it may be too difficult to get a handle on your finances alone. Contacting a trained, non-profit credit counsellor can go a long way towards paying down your debt and protecting your assets. Trained credit counsellors can negotiate lower payments or consolidated payments with your creditors so you only have to worry about one monthly payment.
If job loss has led to your financial freefall and you don’t know how to make ends meet, we can help! Call today to speak to a trained credit counsellor and find out how you can get your budget under control. You can also try our Free Debt Analysis online and a counsellor will reach out to you.