February 17, 2015 11:00 am
Updated: February 18, 2015 1:58 pm

How to survive a financial emergency

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Video: 5 tips for getting through a financial emergency

Tammy Vallee and her husband Roy were doing well. They had recently bought a house in Saskatoon and made some repairs, fixing the siding and insulation, and using a line of credit to help finance the work. Roy was working in Fort McMurray and needed a truck to get to work, so he bought one and started making vehicle payments. Tammy travelled for work, and occasionally spent some money on shopping while visiting other cities, putting it on her card.

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“We made the money and we didn’t worry about it,” says Vallee.

Then, Roy lost his job. A month later, Tammy lost hers. And along with the bills and credit payments, they had to support themselves and two teenagers living at home. When their 19-year-old son moved back in briefly, it was tough, even though he paid them some rent money.

READ MORE: The changing world of work

“You want to make it easier on your kids if you can, but we couldn’t afford to feed him,” says Vallee.

Tammy has applied to over 160 jobs in the past year, she says. But she finds that managers tell her she is overqualified for many, like retail, as she used to run a research and genealogy program for a local Métis nation. In the meantime, she has been on EI.

Roy did eventually find work as a transit driver for the City of Saskatoon. Unfortunately, shortly after he was hired, transit workers were locked out by the city for nearly a month. So again, the family didn’t have enough to get by.

“Our house has always been one where if somebody needed something they came here and we’d try to help. We’d try to be there,” says Tammy. “The last year, that’s been more of a struggle too.”

“All the kids want to come home for supper. And you think, ‘I don’t have that much groceries. How am I going to make supper to feed us all when I don’t have all of the groceries that I used to have?’”

Vallee should have saved more when both she and her husband were employed, making a combined income of nearly $200,000, she says. “What I wish I had done differently and what I know I should have done differently are two different things. I mean, I know we should have been more careful about what we were paying off and what we were spending.”

“Do I wish I hadn’t shopped while I was in Toronto? Not really, because I enjoyed it.”

“I wish we had been more careful and thought more for the future, but when you don’t really think things are going to happen…”

On strike

Kyle Bauder lives in Penticton, B.C. and works as an electricity meter-reader for FortisBC. His wife Leanne is a caregiver at a retirement home.

“We were doing fine, keeping up with our bills and so on, trying to keep our debt load down,” says Kyle. Then Fortis employees were locked out for nearly six months.

“It was six months of hell.”

Although he was able to get strike pay, it wasn’t enough to cover everything. “It was quite the hit on our budget. We already had a little bit of debt and it didn’t get better with the strike. We were on strike six months. It wasn’t fun. You have to budget everything from what you eat to how much gas you purchase and where you go.”

Bauder had to empty his carefully-collected RRSP to keep up with bills and mortgage payments. “It was the last resort,” he says.

One major help was his mother-in-law, who helped with child care for his two- and four-year-old daughters. “Grandma lives just down the street from us and is not charging us for daycare. She did at first, but then when the strike happened, she said we would figure it out after. She’s been a saving grace for both of us,” says Bauder. He estimates that Grandma saved his family about $1,200 a month (or about the same as his mortgage payment), and it would have been “a lot worse” without her.

Now that he’s back at work, Bauder says his family no longer has trouble paying the bills. But, he worries about his future with the company. FortisBC is moving to smart meters, he says, which could mean that he will be out of a job by the end of the year.

So, he’s keeping an eye out for other jobs, as well as preparing for the worst.

“Save up, because you just don’t know when that time may come when you just don’t have a job anymore. Just those little things – you’re going to need that spare change for something,” he says.

Dealing with financial emergencies

You can’t always prevent or predict whether you will lose your job, become ill, or any number of other unfortunate events which can hurt your bottom line – among other things. But you do have some control over how you deal with them.

“Everybody at some point has some time of financial emergency,” says Laurie Campbell, CEO of Credit Canada Debt Solutions. “It may not seem like a financial emergency at all to those people who have money set aside. It might just be like a little bump in the road, because the money is set aside, you deal with it.”

A wrecked car can be a financial disaster for someone who doesn’t have money set aside, she says. Bigger things, like losing your job, can be ruinous if you’re not prepared.

“The biggest recommendation that I always make, for everybody, is really you should have three to six months of funds set aside for emergencies like that because it takes that long to get back into the job market.”

A lot of people might say that they don’t have any extra money to save, but she says, “I think anybody could probably find 20 dollars of pay to set aside. Something.” Any savings are better than nothing, she says.

READ MORE: 5 steps to a financial plan

Campbell also cautions against building up too much debt when times are good. “So many people are living so close to the edge that they really can’t handle anything going wrong in their lives.” For those people who are carrying a lot of debt, any difficulty can become a crisis.

“Those people are going to have a hard time getting out of that situation without making some drastic changes. It might mean selling their house. It might mean selling their car. It might mean downsizing significantly to get them through if they lose their job and they are already in a bit of a financial pickle.”

But when crisis hits, there are some things you can do to mitigate the damage.

Campbell urges people to find out immediately what government income they might be entitled to, such as employment insurance, back-to-work programs or job training. Community groups can also help you find out what options you have.

She also suggests that you not keep your financial problems a secret.

“Tell the people who can maybe help you as quickly on as you can. Don’t wait until you’re two months in arrears with your rent.”

Family and friends can help you in a variety of ways, from emotional support, providing child care like Kyle Bauder’s mother-in-law, offering cheaper living arrangements and pointing you to job opportunities.

Also, it is a good idea to look at cutting your expenses sooner rather than later. “If you’re driving a vehicle and you don’t need to drive it, get rid of it before it gets towed out of your driveway,” says Campbell. Even though you might think you’ll find a new job immediately, it’s better to be safe and trim extras early just in case.

And, Campbell cautions, “Try to avoid high-interest debt such as credit card debt to help you through this time because it is so costly and it’s very, very difficult to catch up once you get behind.”

Even when you finally get back to work, you may have a tough few months digging yourself out of debt. “It probably means that you’re working under a very tight budget to put as much as you can toward your debt aside,” she says. If you’re having trouble, consider reaching out to an accredited credit counselling agency to come up with a plan for repaying the debt.

Do you have the assets to live without a paycheque? We’ve put together a calculator below to help you figure out how long you could last on your financial assets (not including real estate or retirement plans).

Note: This feature is included for expository and informational purposes; it is not meant to be taken as personalized or expert financial advice.

Have you recently experienced a financial emergency? How did you deal with it? Tell us your story using the form below. 

Note: We may use your response in this or other stories. While we may give you a shout to follow up we won’t publish your contact info.

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