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6 Tips for When You Lose Your Job!

Unfortunately, this is a key life event that will be happening more frequently in the coming months, and how someone handles it could have a big impact on their future financial wellbeing. At TriDelta Financial, as part of our financial planning work, we work with those who are worried about being laid off, and occasionally after it has happened. Here are 6 key tips that we review with clients in this situation.

1. Don’t sign anything right away.

If you are being fired, your employer will likely provide you with some form of severance offer. The time to sign it is only after you are able to think clearly, do some research, and understand your options. At the time of termination a new contract is being negotiated which defines the terms which will end the first contract. The time to protect your rights is at the time of termination, not later. If the agreement is signed the employee cannot come back later after receiving legal advice or after months of unemployment, to renegotiate the deal.

2. Get a secured line of credit in place before something happens or as soon as possible if something does.

If you own a home and have equity in the home, a secured line of credit is the most cost effective and easiest loan to set up. While it can be used for anything, it can be a lifeline and provide significant peace of mind in case of unemployment. While it isn’t the goal, to use $50,000 of a $300,000 line while unemployed for a year, and then pay it off in your first couple of years in the new job – can make a very stressful time, much less stressful. If you are not working, it is much more difficult to get approved for a line of credit. A mortgage broker can be a good alternative to your local bank in terms of options.

3. Negotiate more than just money – although more money helps.

In addition to cash, other potential items include having the company pay for ‘outsourcing’ or ‘job counselling’ to help you find a new job. The company can pay for a consultation with a lawyer or financial planner. There might be room to extend health and pension benefits. Perhaps you can negotiate a recommendation letter. As with all negotiations a termination package can be successfully negotiated when you understand your legal rights, are reasonable, and effectively advocate for a fair and reasonable package.

4. If there are health issues, be sure to convert group plans into an individual policy.

If someone has health issues, a group insurance plan is a great way to get coverage. When you lose your job, you lose your group coverage. In many cases, if you act within 30 or 60 days, you can convert group plan coverage into personal coverage without a medical. Unless you are in excellent health, this could be your only chance to obtain sufficient insurance coverage at a standard rate.

5. Proper Tax Planning can save you significant costs.

Examples might include, taking a severance package over 2 calendar years or even deferring it to the next year. If you worked at the company since 1996 or earlier, you can qualify for a retirement allowance to go directly to your RRSP as opposed to being taken as income. Even if you started in 1997 or later, there may be RRSP room to shelter some severance payment.

6. Do you take the pension or the cash?

For some, there is a big decision to make about their pension plan. If you have this choice, among the factors to calculate are – what type of rate of return does your pension provide. How long do you think you will live? What type of investment yields can you achieve in a personal investment portfolio (today might be one of those rare times when you can set up a portfolio with much higher income than your pension plan)? How much are you willing to pay for the peace of mind of a fixed pension. Is the company going to be able to maintain the full pension in the future?

Regardless of your employment situation, it is important to understand your rights and where you stand financially. Working with a Certified Financial Planner to build a comprehensive financial plan will provide you with the knowledge and a coach to ensure that you make the right decisions.

At TriDelta Financial Partners we work with you to develop a comprehensive plan and offer you independent, unbiased solutions to meet your needs and goals. Whether it is a mortgage or line of credit, life or critical illness insurance, investment management, or just proper planning advice, we are here to help.

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