Four ways to secure your finances in this terrible job market

We are not, technically, bankrupt. But for those who are currently unemployed, we can be too.

We are in what economists call a “low-fire, low-hire” market. Employers are shedding jobs left and right as they may be in a recession. But growth is sluggish, and uncertainty — about everything from tariffs to war with Iran and the future of energy prices and inflation — is high.

As a result, many companies are in a wait-and-see mode and are not in the mood to hire. For job seekers, it means that there are few significant opportunities out there. The unemployed may spend some time out of work.

If you are doing well, now is the time to check your emergency fund. Do you have enough to stay afloat if you lose your job in this scary job market?

Here are four tips that will help you prevent your financial problems:

See how long it takes to find another job. Statistics Canada tracks the average unemployment rate, which is a practical reality check. This page shows the number currently sitting at 24 weeks for those 25 and over. A general rule of thumb for your finances is that you should have three to six months of living expenses covered. In this economy, try to reach the higher end of the range.

If you are eligible for EI, see how long your unemployment benefits will last. That depends on the number of hours you worked last year and the state of the labor market in your area. The good news is that the government is changing the length of benefits based on the local unemployment rate. The higher the local unemployment rate, the longer you can stay on EI. For example, in Toronto, the current maximum is 40 weeks. Here is a page where you can check the maximum for your area.

If you qualify for EI, your emergency fund doesn’t have to carry that much weight. Think of it as money that helps you bridge any gap between your unemployment check and what you need to cover monthly expenses, as well as money that can keep you working for a few weeks once EI ends.

Consider keeping a separate slush fund for small emergencies. If you only save six months’ worth of expenses, chances are your emergency fund won’t last that long. Life is full of small, quick, unexpected events: A trip to the mechanic, a leaky pipe, a surprise vet bill. These will not stop just because you are not working. To make sure your rainy day fund lasts as long as you hope, it’s important to build a contingency plan in it so you can cover unexpected expenses from time to time without going into debt or shortening your financial path.

Establish a line of credit as a last-resort financing source. If you don’t have a credit limit, now is the time to do one. It will allow you to borrow at much lower rates than a credit card. That said, avoid taking on debt when you are unemployed, if possible. Your emergency fund should be your first line of defense.

What is your strategy for securing your finances in a disaster? Contact me at: ealini@globeandmail.com

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Finally, many Canadians wait until 70 to start their CPP pension.

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