How to manage a reduction of income in your household

Employment Insurance stats indicate Albertans are the primary beneficiaries     

Reduction in income

No doubt about it. Life just happens. Sometimes you are presented with an awesome surprise like a job promotion or you receive an unexpected layoff notice, resulting in unwanted reduction of income.

The reality is at the end of the day most Canadians are not financially prepared for an unexpected job loss. And when you are unprepared for the unexpected, you may feel like your hands are tied and you’re walking off a wobbly plank.

Statistics Canada released the latest statistics for Employment Insurance for the month of May. The good news, EI beneficiaries for the month only went up 0.9 per cent from April 2016 on a national level. The bad news is Alberta had the biggest rise of EI beneficiaries by 12.1 per cent – the largest increase since June 2009. In comparison to the same time last year, EI recipients increased by 58.6 per cent in Alberta. Despite the grim numbers, Stats Can says the increase to beneficiaries is the direct result of the Fort McMurray wildfires which occurred in early May.

The unexpected wildfires in Fort McMurray may have left many Albertans wondering what to do with their household finances as they come to terms with a significant loss of income. Despite the hardship numerous Albertans face, Jeffrey Schwartz, executive director, Consolidated Credit Counseling Services of Canada says all hope is not lost:

“A reduction of income is difficult to manage for any household especially if you were completely blindsided beforehand. Nevertheless, when you feel your finances are off the rails and you’ve lost hope, a trusted advisor can help you weather the storm,” says Schwartz.

“Sometimes all you need to get back on track with your debt management is the comforting support of a trained credit counsellor. When you try to tackle a mountain of debt on your own – it can become very stressful and daunting,” says Schwartz.

Consolidated Credit helps thousands of Canadians nationwide and if you are struggling to make ends meet by deciding what bills you can afford to pay on a monthly basis, it is time to accept a lifeline of support. You can do this by understanding how to manage your household finances during this difficult time. Here are some tips to help you stay afloat during a job loss:

Create a new budget

When you experience a job loss or a reduction of income – it is time to get a handle on your new reality with a budget. Sit down and get a clear understanding of your household expenses and your household income (EI, part time work, child support, government assistance and other household income). This will give you a good idea of how long it will take to swim to shore without drowning in debt.

Understand how to apply for EI benefits

No one wants to willingly apply for EI benefits. It can be hard emotionally to accept your new employment status. However remember the government deducted money from your paycheque so why not apply for it? You’ve worked hard for those benefits so you might as well take advantage of them. Employment Insurance will help you to stay afloat of your finances until you find another job.

Sound the alarm Wave the white flag and be honest with your creditors. Hiding from your creditors will ensure a bad credit rating. You can prevent this by picking up the phone to explain your recent job loss. You can also take the opportunity to ask if there are options to reduce your monthly payment or interest rate on a temporary basis. You may be surprised by how your creditor is willing to work with you.

Draw a line

It’s time to draw a line on your spending. Easy right? Wrong. When you are used to living a certain lifestyle, it can be hard to cut back. However if you want to avoid digging a deep hole of debt, you have to make adjustments to your lifestyle. Believe it or not, this cost-reduction exercise is a good way to get the whole family involved. You can use this opportunity to teach your children about finance.

Save for the future

When you lose your bread and butter – it can be very hard to think about your future. However creating a plan to save for your future is the best thing you can do. You do not have to put aside large amounts of cash; budget for what you can afford. Keep saving your money until it becomes a habit. So when you get back on your feet, you will have a savings account to deposit a portion of your paycheque.

If you are lost and feeling overwhelmed with your debt management and unable to save for a rainy day, let Consolidated Credit Counseling Services of Canada help you overcome your struggles with debt. You are not alone and help is available. Just pick up the phone to call a trained credit counsellor now at 1-888-294-3130 or go online to complete a free debt analysis.

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