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Surviving Job Loss

It’s personal, but it’s business


Sudden job loss brings on a tsunami of broadsides. It is emotional, it is personal and in terms of juggling crunched finances, it is also business.


There is a consensus among health professionals that job loss, particularly sudden job loss, ranks among the highest life stressors, along with a death in the family, divorce and serious illness. Tied into the package is denial, anger, frustration, depression and grief.

Research indicates a significant part of a person vanishes with a job loss. As many people identify themselves by what they do for a living, when the job disappears, they can lose track of who they are – and their overall purpose in life.

Despite (or compounding) the emotional roller-coaster, the shock and anger, and the private stress, there’s the reality of vital money-related facts like budgets, health insurance and dealing with some unexpected (and suddenly new) tabs of life.

The money side of sudden job loss often happens with invariably lousy timing. For many suddenly-displaced Canadians, job loss comes at a critical stage in life, when people traditionally accumulate wealth. According to a 2017 report on income equality by the Fraser Institute, Canadians often earn their highest incomes and build much of their wealth from their mid-40s through to their mid-60s, allowing them to build up assets critical for retirement, a period when their income and wealth decrease.

Recent Statistics Canada numbers tell the unfortunate story that, last year, approximately 850,000 Canadians were laid off. Among them, about 198,000 individuals – or 23 per cent – were between 55 and 64.

“We all feel empathy when a colleague experiences a tough transition, and it’s OK to feel that emotion,” says Laura Strickler, director of human resources at ADP Canada, the global provider of cloud-based human capital management (HCM) solutions that unite HR, payroll, talent, time, tax and benefits administration expertise. “This is a difficult situation and it’s important to acknowledge the gravity of what’s happening and be compassionate.

“If the person is open, it can be helpful to offer some insight into the why of the difficult decision and recognize the business impact to provide context as to what is happening. However, it’s important not to lose sight of the emotions a person is feeling. We all have a heart and brain, and it’s very important to address both.

“Take time to reflect and ask yourself if embarking on a new career path is viable. Outplacement services and government reskilling programs are a great place to start as they can help plan out next steps and identify new skills. Talk to other people about your job search – don’t overlook friends and family as part of your job-hunting network.”

HR professionals and financial planners echo caution about hasty and impulsive personal or money decisions when mood is at an all-time low. However, the crunch consequence of a job loss causes (and often forces) people to re-evaluate their personal and household budgets.

Losing a job means living with less income to pay for household expenses, which ultimately results in a need to reduce spending. The Financial Consumer Agency of Canada (FCAC) recommends reviewing expenses and looking for areas to cut costs, freeing up more money for priority items. FCAC also emphasizes that every budget includes needs and wants. Needs are must-haves like housing and food (rent or mortgage, utilities, groceries and debt payments). Wants are a bit more discretionary (eating at restaurants, entertainment and new clothes).

“The main tips that I can usually give people is that if you are struggling with debt, there are options available,” says Donna Carson, licensed insolvency trustee and senior VP at MNP. “And the sooner that we can review the options with someone, the more choices they may have. Of course I understand it: it’s a pride thing where people sometimes don’t like to talk about their financial troubles; we like to deal with that on our own. But … sitting down with a licensed insolvency trustee (LIT) doesn’t necessarily mean they have to file anything.

“It can be an information session to see what options are available and how they would work based on individual circumstances. Everyone’s situations are different. So, even though it is the same ‘rules’ that are followed, people have different assets, different creditors and different incomes. Getting professional advice can at least take away the fear of the unknown…. Sometimes that fear of not knowing what to do can be the biggest stress.”

Sudden job loss is invariably a jolt, understandably not open to the 20/20 wisdom of hindsight. As a result, many financial planners support the need for a just-in-case emergency fund.

“Strongly recommended,” MNP’s Carson says. “For job loss and irregular expenses that happen once a year. For example, property taxes, car repairs, vacation, school clothing, hockey registration, etc. The way to plan for annual expenses is to make a list of them and approximate how much they cost each year. Add them up, divide by 12 months and set aside the funds for annual expenses. Paying monthly for these expenses is a lot easier on the budget than coming up with $1,000 for school clothes and supplies all at once in August each year.

“An emergency fund generally is recommended to be three to six months of your basic expenses set aside. If I was off work, can I cover the essentials for three to six months?

“Retirement funds should not be the funds used for annual expenses or the emergency fund. With the recent economic downturn we’ve been living through in Alberta,” she points out, “I’m sure this has been a reality though for a lot of people. I would caution that if you are using retirement money for emergencies, it is not a fix. It’s only a Band-Aid, and likely not the right option.”

Most experienced financial planners realize there is a temptation to use retirement funds during income crunches such as a sudden job loss. While it’s understandable to draw on RRSPs to make mortgage, auto loan and credit card payments, in the end it exacerbates money problems.

Withdrawals for needed items today can have long-term effects, reducing available cash flow in old age by tens of thousands of dollars while adding near-term income tax penalties. Most people generally lose their job after earning income for a few months of the calendar year. An RRSP withdrawal in the same year may push them into a higher tax bracket, meaning they will likely face a significant tax bill the following spring.

Compounding the matter is also the issue of health insurance. Most group plans cover employees only as long as they remain part of the insured group. When the job ends, so does the coverage. Experts urge checking with the benefits provider about switching over from the group plan to individual coverage for vision, prescription drugs outside a hospital, acupuncture, physiotherapists and dental services.