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How to pay your bills if you’ve lost your job

Stay on top of your finances while you look for a new job.

If you’re willing to be proactive in managing your money, it’s possible to get through this rough period with less trouble than you might think. And if that’s not enough, there may be resources available to help you until you get back on your feet.

9 steps to meet your financial obligations

If you’ve recently lost your job, it’s important to get in control of your financial situation before things start to go downhill. Follow these 9 steps to help keep yourself on stable footing while you hunt for your next job:

1. Apply for Employment Insurance (EI)

If you qualify for Employment Insurance, you should take it. EI can help spare you the financial hardship of being terminated by your employment, should you qualify for it. You’ve paid into the program and have done your job – that’s why Employment Insurance is available in the first place.

2. Calculate your savings

If you have savings, now is a good time to rely on your savings accounts and potentially trade in any stocks. Think about the outgoing costs you have and how long your savings will be able to support you so that you can focus on the most important tasks first.

3. Find out if you’re waiting on any outstanding payments

If you have any overdue invoices from past clients, insurance payouts that haven’t shown up from a car accident or flood last year or even friends who owe you money, now’s the time to collect. You should also take stock of income-generating assets like rental properties and figure out what you expect to receive each month.

Also factor in any benefits you can expect to receive in the future. For example, if you have payment insurance on debts like credit card balances and personal loans, you’re payments are usually covered in the event of unemployment or medical emergencies, giving you one less expense to worry about.

4. Prioritize your expenses for the next 2 months

Start by looking at your regular and essential costs, such as groceries and utilities, before considering your ongoing debts. When it comes to debt repayments, you can divide them into unsecured and secured loans.

For example, credit cards and personal loans are types of unsecured debt, while a mortgage or car loan is secured debt. Prioritize paying secured debts first, as creditors can reclaim assets secured to a debt if you don’t make your monthly payments. But if it’s possible, you should always aim to pay at least the minimum required on all of your debts.

5. Work out your budget

Work out a budget so you know how long you’ll be able to live on your savings, outstanding payments and any income support payments you receive. Remember, this is your safety net and there’s a chance that you could find employment sooner than expected. A budget can also help you cut unnecessary spending by showing you where the majority of your money goes.

6. Limit your spending

Using your budget, identify which expenses are your “needs” and “wants.” The expenses in your “wants” list can be cut to free up extra cash while you’re looking for more work. Gym memberships and subscription services like Netflix are examples of “wants” and can be canceled or suspended while you’re looking for work.

7. Contact your providers

Reach out to your creditors and service providers, and let them know that your employment circumstances have changed. They will most likely offer you a range of options based on your individual situation, such as a payment extension, an extension of the loan term so you have smaller repayments, or a temporary hold on your repayments. You’re much more likely to get a positive response if you’re proactive and ask for help before defaulting on your debts.

8. Continue seeking employment

This could include contacting colleagues and friends to see if they know of any appropriate opportunities you could apply for, updating your resume and connecting with people on services such as LinkedIn. There are also employment agencies and placement services that could help you find secure or temporary employment.

You may also want to get the money coming in again by picking up odd jobs whatever you have to do to avoid paying bills late and damaging your credit file. Online work is more accessible than ever, and freelance work platforms such as Upwork, and TaskRabbit are handy when you’re looking to make some extra money.

9. Explore debt relief options

Debt relief options are often used as a last resort because the implications can have negative long term effects on your credit score. Forms of debt relief include bankruptcy, consumer proposals, and debt management. The main goal of debt relief is to drastically reduce the amount you owe your creditors, or in some cases, such as filing for bankruptcy, wipe the slate completely.

If you’re interested in exploring debt relief options further, make sure to do your own research first before committing to something that may not be right for you.

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Do you qualify for Employment Insurance (EI)?

Requirements for receiving Employment Insurance can vary depending on where you live, but if you lost your job for reasons beyond your control, there’s a high chance you qualify for Employment Insurance. The first step to finding out if you qualify is to visit the Government of Canada website to look at the eligibility criteria. Unfortunately, many people never reach this step because of preconceived notions regarding their eligibility and feelings about taking money from the government.

How to apply for EI

  1. Visit the Government of Canada website or go to a Service Canada office.
    Get an overview of the EI program, find out if you’re eligible, learn what you need to apply and to access an online application. You can do this at home, at a Service Canada office using an internet kiosk or by going somewhere where you have internet access like a public library.
  2. Complete an application.
    Fill in the application, providing your personal information, details about your unemployment, how long you were employed, how much you made at that time and so on.
  3. Find out if you’re approved. If you are, begin receiving your payments.
    If eligible, you’ll receive your first payment within 28 days of the date your application and all required documents are received. Technically, you’re payment for the first week will be withheld as a “deductible” similar to what you’d pay for regular insurance coverage – this week is called your “waiting period.”
    You’ll find out by letter or phone if you’re not eligible for EI, and you may request a reconsideration of your application if you want.
  4. Complete biweekly status reports.
    Complete reports online, by phone or by mail every 2 weeks detailing your efforts to find a job. This is done to ensure that those benefiting from EI genuinely need it and aren’t taking advantage of the program.

Employment Insurance (EI) and other types of job loss insurance

Other options to consider

Consider the following options if you’ve lost your job and money’s tight:

  • Debt consolidation. Consolidate your debts into one monthly payment. A debt consolidation loan or balance transfer credit card can save you money by giving you a lower interest rate. Some lenders accept unemployed applicants.
  • Early access to your retirement plan. Many retirement plans will allow you to withdraw money early if you’re experiencing a financial hardship. If you’ve been paying into a Registered Retirement Savings Plan (RRSP) look into your options for withdrawing early.
  • Emergency help services. Charity and community organizations can provide emergency financial assistance if you spent all of your money paying your bills and don’t have enough for food or other essential costs. You may also be eligible for government assistance. Contact your city government to find out about local social and human services departments or find organizations on sites like Charity Village.
  • Get a loan with a cosigner. If you don’t have enough income on your own to qualify for a loan, consider asking someone you know to back your loan. As long as he or she makes enough money and meets other minimum lending requirements, your odds of being approved will greatly improve. However, if you fail to make payments, your cosigner will responsible for your debt, so don’t go this route if you’re not confident that you can handle repayments.
  • Short-term loan. If you need help paying for everyday expenses while you job hunt, some lenders offer short-term loans to people who are unemployed. Keep in mind that these loans are likely to have high interest rates and should be a last resort. However, some short-term loan providers accept government welfare as a source of income for the purpose of qualifying for a loan, which could be helpful if you’re on EI or receiving other benefits while unemployed.

Debt consolidation loans vs balance transfer credit cards: Which is right for you?

Should I use my credit card to pay bills when I’ve lost my job?

Avoid using your credit card to pay your bills. Creating new debt to pay an older debt is a slippery slope to financial ruin. Instead, work out a plan with your provider or contact a nonprofit financial adviser to discuss your situation and get specific advice on how to manage your financial commitments.

The exception to this rule is a balance transfer credit card. If you already have debt on several credit cards, a balance transfer card with a low introductory interest rate can help you avoid accruing interest on your current cards while you get back on your feet. This is only a good option if you feel confident that you’ll be able to repay the balance before the introductory period is up.

Bottom line

If you’ve recently lost your job, spend some time taking stock of your situation and planning your next moves, so that you can stay in control of the situation. And if you’re having trouble staying on top of your debt while you’re looking for a job, consider reaching out to a debt counselor for advice on your options.

Take a look at our guide on debt to learn more about different types of debt and various options for digging out of a financial hole.

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