5 Key Questions After a Job Loss
Courtesy of Financial Planning Standards Council, Posted 28 Oct 2016
Job loss is one of those life events that packs a whammy, both financially and emotionally. Often it happens unexpectedly, with many ill-prepared for the sudden changes that it brings. Whether you are laid off from your job, find yourself facing an unexpected “early retirement” or suddenly find yourself unable to work because of a serious accident or injury, the financial impact can seem overwhelming—sometimes even devastating.
The initial shock of losing a job often leads many of us to knee-jerk reactions and decisions that can impact financial stability for years. It’s not the time to make any rash choices, especially where money is concerned. In fact, this may be one of your best opportunities to take a step back and reflect on your current needs, life goals and aspirations. With this fresh new lens, sit down with a professional to help you map a course that will balance what you need and want today with the personal goals you have for the future.
AS YOU CONSIDER YOUR OPTIONS, YOU’LL WANT TO ASK YOURSELF SOME KEY QUESTIONS.
- Is the lay off a short-term phenomenon, seasonal or permanent?
- Have you been offered a severance package? If so, should you try to negotiate for more?
- Once you receive the money, what is the best way to use the money?
- What should you do with your existing pension plan (commute, move, or leave the plan where it is)?
- Are there opportunities around pension splitting that may benefit you at tax time?
These are just some of the issues and questions that make it prudent to seek the advice of a professional, who can also bring in other professionals, such as lawyers or accountants, if necessary.
Andrew Dedousis, CFP, with Meridian Credit Union in Guelph, Ontario cautions against making common mistakes: “Often, individuals want to immediately eliminate debt by withdrawing investment savings, but this can bring both tax ramifications and the prospect of leaving too little for retirement.” There are alternatives to liquidating everything right away, he says, and these options need to be explored with a professional who is qualified in financial planning before embarking on any emotionally-charged decision.
Ultimately, however, the key to survival is being well prepared before a pink-slip or illness brings unemployment says Dr. Moira Somers, a clinical neuropsychologist with Money, Mind and Meaning, specializing in financial psychology.
“When a significant life event happens, people often make a resolution never to leave themselves so vulnerable again, but that doesn’t put food on the table today,” she says. “When in a panic, people can lock themselves into a new job or financial situation that is not their best option. This is why it’s so important to plan and have an emergency fund, and where it helps to have trusted advisors. They can provide the reassurance and breathing room necessary to take stock and determine where the best path lies.“
In fact, losing your job could well be one of the best opportunities you have to gain greater control over your financial future and emotional well-being. Speak with a professional about your options today and the future may seem brighter than you think.