The numbers are out, and they aren’t good. April unemployment numbers were released by Stats Canada this week.
Some of the key points mentioned:
- Unemployment rose to 13%, a number that doesn’t fully include recent job losses. Taking into consideration other elements, like self-employed persons who worked 0 hours, that number climbs higher than 17%.
- “21.1% of Canadians lived in a household reporting difficulty meeting immediate financial obligations.”
While these numbers don’t paint a rosy picture, the question becomes:
What can you do to prepare yourself during the COVID pandemic?
The answer to that question falls into two categories; those who aren’t seriously affected (yet), and those who are.
If you haven’t been dramatically adversely affected, your focus should be on strengthening your financial fortress, and exploring ways to increase your value. Check out the 5 Steps to Recession Proof Your Life.
If on the other hand the COVID situation has hit you hard, the questions you face are far more concerning. While the focus is still on cash, growing your reserves might not be an option. At this stage, you need to be eliminating debts and freeing up cash flow (i.e. cutting the cord on some of those subscriptions). Then it’s time to look at where to draw money from.
I’ve lost my job. What do I do now?
With unemployment numbers jumping to unprecedented highs, and far more rapidly than ever before, this financial downturn has struck hard and fast. Next steps for you should involve reversing your “good times” financial allocation.
It’s an Emergency. Use your Emergency Fund
If you have been following the financial advice of Business Minded, or any personal finance professional, you likely have some funds tucked away in an emergency fund. Now is the exact time that you’ve been waiting for. Start drawing down on your emergency savings to pay your bills.
These days come rolling in full of uncertainty, will you go back to work next week? Next month? Many people are seeing their situations as a temporary inconvenience, and this is leading to some risky financial behavior. Expecting to return to work, and therefore floating your expenses on credit cards or other forms of borrowings is exceptionally risky, and likely to place you in a worse financial position.
While it may be hard to see that wonderful looking emergency fund start to deflate, it is far better than skating on thin ice that comes with borrowed monies.
Once the emergency fund is used up, you should then start looking at liquidating your investments, starting with non-tax leveraged accounts. By the time you get to this stage, you should be seeking out professional guidance, as your unique situation needs to be more closely evaluated.
As the economic environment worsens, it’s time to use your emergency fund for what it was designed for, emergencies. Drawing down on those hard-earned savings will help you weather this economic storm, and allow you to come out on the other side with your financial fortress intact.