Budgeting While Unemployed: What You Need to Know
More than 3 million Canadians lost their jobs because of the COVID-19 pandemic. If your employment situation has changed over the last year, the financial strain can feel overwhelming. It is important to know how to prepare yourself for every scenario as you move forward. From re-evaluating your budget to exploring debt relief solutions like a consumer proposal, our Licensed Insolvency Trustee in Niagara will be there to help.
If you’ve found yourself unemployed because of the pandemic, our Licensed Insolvency Trustee (LIT) will assist you by exploring your debt relief options. First, the LIT will look closely at your financial situation. This includes a close review of your debt to evaluate how you budget for expenses.
One of the things we consider when doing this is what unnecessary expenses can be cut. These expenses are the “nice to haves,” but not essential to maintaining your livelihood. Some examples include take-out at restaurants and subscriptions for online entertainment. Freeing up this money will help you stay on top of essential costs, such as rent or mortgage payments, utility bills and debt payments.
Also, if your employment has changed consider taking a vehicle off insurance if you have more than one vehicle in your household.
We often recommend the 50/30/20 Budget Rule to help categorize your monthly expenses into needs, wants and savings. This structured budgeting method aims to cover those necessary expenses while also setting up a savings fund to help you prepare for emergencies or shortfalls.
We recognize how challenging it can be to manage your finances when you are unemployed. Our LIT can also advise you on how to control your credit card debt and maintain a tight budget.
A consumer proposal may be the best option for you to regain stability with your debt payments.
In a consumer proposal, you and your LIT will create a “proposal” that outlines how you intend to repay all or a portion the debt owed to your creditors. The amount to be paid is usually done so over a period of time.
If your creditors accept the terms of the proposal, you will be responsible for making payments to your LIT, who will administer the money to your creditors. The term of the proposal cannot exceed a five-years.
A consumer proposal can help you pay off debt faster than if you continued making payments based on your existing situation. Filing a consumer proposal also provides legal protection against creditors, which means your wages cannot be garnished and you will not be contacted by bill collectors.
If you choose to file a consumer proposal, our Licensed Insolvency Trustee will work with you through every step of the process. Contact us for a free initial consultation to bring a brighter financial future within your reach.