This article provides practical advice on how to prepare for a potential recession, focusing on creating a survival budget, managing unemployment benefits, exploring alternative income sources, and building a robust emergency fund. It emphasizes the importance of proactive planning and resourcefulness in navigating economic uncertainty.
Since Mr. Trump started making his tariff threats, economists have been scrambling to estimate the impact on our economy. The results are dire. Ontario Premier Doug Ford’s office recently estimated that as many as 500,000 jobs could be lost in that province alone. This would drive unemployment in Canada’s most populous province above 10 per cent.
So now’s the time we should all look at our household finances and ask ourselves a hard question: will you be okay if you or your spouse loses their job? The first step in preparing for a recession is to create a survival budget. You start by going through your current budget, line by line, and asking: can I pause this if I lose my job? Luxury spending such as vacations should be the first to go. Eating out and entertainment should also be eliminated. Cancelling or downgrading any subscription services that aren’t mission critical, such as premium cellphone plans or cable TV, would also be a good move. Remember, you aren’t actually making any changes yet. You’re creating a plan for what to do in case you lose your job. If that doesn’t happen, you don’t have to do anything, but it’s important to be aggressive with these potential cuts because the lower your survival budget is, the easier the next steps will be. If you lose your job through no fault of your own, you are generally eligible for Employment Insurance (EI) benefits. How much you get depends on how many hours you’ve worked in the past 52 weeks and your salary, as well as the unemployment rate in your region at the time that you file. If you’ve been working full-time for the past year (40 hours a week) and earn at least $65,700 a year, you can expect to receive the maximum EI benefit of $695 per week, or $2,780 a month. Because of how tariffs work, they will affect entire industries at once. That means that if you work in one of those affected industries and you lose your job, you likely won’t be able to simply jump into another company because they will also be hit by the same tariffs. So you’ll need to get creative with your job hunt. Are there any related fields to which your skills can be transferred that won’t be affected by these tariffs? Is it possible to do your job remotely? Remote jobs can potentially evade tariffs if they’re located in another country. You may want to browse a site like Upwork, a job posting site that specializes in remote jobs. Use the sharing economy to your advantage. If you’re a homeowner and have an extra bedroom, consider hosting travellers on Airbnb. Remember, Airbnb started in 2008, during another financial crisis, to give laid-off workers a way to make ends meet by renting out a spare bedroom. Similarly, if you own a car, consider renting it out on Turo. You should have enough in your emergency fund to cover at least six months of living expenses. The purpose of the fund is to buy you time to find a new job, so the bigger it is, the better you’ll be able to weather whatever storm is headed our way. The minimum size of your emergency fund should be calculated like so: emergency fund=(monthly survival budget – EI – alternative monthly income) x 6. This is why it’s so important to be as aggressive as you can in crafting your survival budget. The lower your monthly needs are in a recession, the less money you need in your emergency fund to pay for six months of it. Similarly, the higher your EI benefits and the alternative monthly income you can create, the lower your emergency fund needs to be. Get creative, because every little bit helps. Just like we all check our fire extinguishers and smoke alarms in the hope we never need them, a recession survival budget is something we all wish we’ll never need to use. But with storm clouds gathering from the south, now’s the time to make sure your survival plan is in tip-top shape
Economics Recession Financial Planning Budget Emergency Fund Unemployment Benefits Job Search Sharing Economy
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