Canadians workers can find some encouragement in recent reports showing that employment prospects are improving.
A recent survey of the corporate sector by the Bank of Canada shows that sales are set to increase in the next year due to a strengthening U.S. economy and lower Canadian dollar, and the outlook for investment growth and hiring both are positive.
BMO Bank of Montreal also has found that workers across the country are optimistic about the outlook for their companies this year, with twice as many expecting they will increase rather than decrease the size of their workforce.
However, in today's uncertain economic conditions the the threat of losing your job is always present.
"Whether it's your decision or you are forced to leave, losing your job is a major event in life," says Colin Montgomery, a financial planner with Edward Jones. "We encourage people to look on this as an opportunity to review their situation and get their financial house in order. There are a lot of decisions to make and it's crucial not to make them in haste without some professional advice."
If you are working it's a good idea to build up an emergency, high-interest bearing account that would cover six months of living expenses in the event your employment ends, for whatever reason. This can make the transition a lot less stressful and give you some time to find new or alternative employment without having to worry about where the money to pay the bills is going to come from.
If your employment does end, the first step is to take an inventory of your assets and your situation.
"Look upon it as an opportunity to get your financial house in order," says Montgomery. "Take a look at your financial inventory - what are your assets, your debts, your severance and what are your job prospects. Go over everything and don't make any decisions until you get some professional advice."
You may want to set up a line of credit with your financial institution which can give you some peace of mind at least knowing that you have access to credit if you need it.
Another strategy is to look at your debt situation. If you can, pay off the debt with the highest interest such as credit cards or consolidate or restructure all debt, including the mortgage. It's harder for the self-employed or unemployed to get a new mortgage or renew one than when you're working for a company.
Find out what you can live on and what income you have coming into the family. A two-income household, for example, may be able to reduce expenses and get by while a single-income household may have to rely on credit until the main wage earner finds other employment.
Find out about your company pension plan. Some are locked in but others can be rolled into your Registered Retirement Savings Plan (RRSP). Some plans allow you to withdraw the benefits and convert them to an individual plan, although the premiums likely will be higher. The details should be spelled out in your severance package.
"Ideally, if you can roll it into your RRSP that is great," Montgomery says. "But diversification --- spreading it out between your RRSP, mortgage or other debts -- can be a good strategy as well. Put it where it makes the most sense."
Topping up your Tax Free Savings Account (TFSA) is another option because the TFSA allows you to withdraw funds tax free and then put them back in the next calendar year.
If your severance runs out you have several options such as taking any job you can get, going into debt or cashing in your retirement fund.
"None of these are great options, so that's why it's really important to get some professional advice to make sure you don't do anything too hastily and make the right decisions," Montgomery says.
Talbot Boggs is aToronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.
