Regardless of whether you are permanently employed or your work is more precarious, planning for the unexpected is an essential element of any financial plan.
No matter the nature of the work disruption you might face, here are four tips to help keep your finances in check should the unexpected come knocking at your door.
1. Revisit your budget frequently – and stick to it
It's always a good idea to keep an eye on your budget, and to revise it in real time as your personal situation changes. But if an unexpected financial disruption occurs, that's when an immediate review is important so that you can make the necessary adjustments before time and the situation get away from you. Go through your expenses to categorize and separate your fixed expenses, such as your mortgage, utilities, and food, from your variable expenses, such as meals out, entertainment costs, new clothes, and luxury goods. Take a good look through your credit card statements and itemize any subscription services to see whether you need those TV or music streaming services for example. Often, you can find extra disposable income simply by cutting back on some of those variable expenses, even if it's just for the short term. Once you identify those areas where you can cut back on spending, stick to your new budget until your situation changes.
2. Remember that you have a community around you
Tough times will often bring out the best in us. So if you should find yourself facing an unexpected work situation, remember that family, friends, neighbours and the larger community can help. A major financial disruption such as a job loss can have far reaching impacts on your life, and your community may have people and programs that can support you. For instance, look into shared daycare resources or carpooling.
3. Maintain regular contact with your financial advisor
If you have a financial advisor, stay in touch with them to ensure your finances are on track and your budget is working for you. If you don't have a financial advisor, consider getting one. Many people think that you need a certain income or assets to get a financial advisor, but this is not necessarily the case. Find out now, while you are working, what is needed to work with a financial advisor.
According to the TD Financial Health Index, which surveyed the overall financial health of more than 10,000 Canadians, those surveyed who reported seeking out financial advice were found to more often make better financial decisions while those who make financial decisions alone are among the most financially vulnerable. According to the same survey, those who are financially healthy are more likely to share decisions about banking with another adult in the household (38%), while those who are financially vulnerable are more likely to make decisions about banking by themselves (69%).
4. Slowly build an emergency fund
According to the TD Financial Health Index, four in ten respondents (41%) have less than one week’s worth of expenses saved. Whether you work in the gig economy, or a more traditional industry, setting aside a small portion of each paycheck in a 'rainy day fund' can be hugely beneficial if a financial disruption occurs.
READ: National survey reveals which Canadians are most/least financially healthy
No matter your role or industry, it's always a good idea to be prepared for the unknown to help give you the confidence that you can weather a financial storm. Setting up an account for this purpose can also help prevent you from dipping into your long-term or retirement savings. And you can build one slowly, over time, when you are working.
Dealing with an unexpected financial disruption can be stressful. That's why it's important to incorporate this possibility into your financial plans and to be prepared to reach out for help if you need it.