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Road to money management: dealing with a sudden loss of income

In our five-part series, Road to Money Management, we share stories about Canadians to help you make the most of your financial situation at key stages of your life.

Nadia* is a 30-year-old social media strategist living on her own in a rental apartment in downtown Toronto. Her contract job recently ended and was unexpectedly not renewed because of the COVID-19 pandemic. Now, she finds herself actively hunting for a new job and feels very stressed about the sudden loss of income and her financial future.

She is currently rethinking her entire lifestyle. Government support through Employment Insurance (to which changes were made after the Canada Emergency Response Benefit (CERB) ran out)  won’t last forever and, while she has some savings, she will need to get new work. Because she is living in one of the most expensive cities in Canada, and her line of work can now be mostly done remotely, she is considering moving out of the city to a suburb or community where rent is cheaper. Her apartment lease is up in two months, so she will need to decide soon about possible relocation. Nadia’s parents live in Ottawa, so she is looking at areas east of Toronto, such as Bowmanville and Kingston.

As a millennial, Nadia has had to be resourceful. More than 40% of millennials work or have worked in the gig economy. There are proportionally fewer full-time, permanent opportunities than there were for her parents’ generation and more precariousness in work. She has learned to live simply, within her means and save for rainy days. 

Until she can land another job, she’s also looking at supplemental income and is currently exploring her options. She used to work part-time as a freelance writer and has been getting in touch with her former contacts about more writing work. She hopes to make at least $500 a month doing that for the time being, but needs to look into how that might affect her EI benefits.

Nadia had considered either selling or taking her car off the road and seeing if she could switch her policy to save on insurance costs. But she decided against it because a new, smaller community, might not have as robust a transit infrastructure as Toronto and would likely have cheaper parking rates and insurance costs. Also, she tries to visit her parents in Ottawa at least once a month, thus keeping the car would be advantageous.

After having a long, tearful chat, Nadia’s parents gave her some much-needed encouragement that she would land on her feet again soon and a promise that she could always come home and live with them if needed, as so many of her cohort are doing. Nadia then took the weekend to plan her next steps. 

Aside from looking for a new job and some freelance writing work, Nadia’s main priorities were to research cheaper municipalities to possibly relocate to and build a new and tighter budget to get her through the immediate crisis without getting into too much debt and depleting all of her savings. Her long-term goal was to future-proof her finances – such as building up her savings in a high-interest savings account once she started earning regular income again.

One of her concerns about relocating was getting a new apartment lease in another city with no proof of steady income – but her parents promised to co-sign if needed so, after doing some research, she settled on Kingston rather than Bowmanville because it had more vacancies, was a larger community and was only about two hours from her parents. She could save at least $300 to $400 a month in rent alone, possibly more. After closely examining the past 12 months of expenses, Nadia realized she could save a further $150 on groceries and other expenses. If worst came to worst, she could go at least 12 months until her savings were entirely depleted – with changes in EI because of the pandemic she can also qualify for the benefit longer.

That weekend, she did a lot of soul-searching and determined that a move could be a good thing. She found Toronto large and expensive, and especially because of COVID-19, she craved more access to nature. Kingston’s many trails and its location on Lake Ontario appealed to her. She decided that the misfortune of losing her job could be the catalyst for a better future, personally and financially.

If you’ve experienced a job loss, CPA Canada has some tools and resources to help you manage your money while you get back on your feet.

Next in our series: Gregg and Lisa are a millennial couple looking to buy their first home before starting a family. 

*Nadia is not an actual person, but her story is indicative of what many millennials are facing when it comes to finances and money management. It should not be construed as financial advice. Reach out to a financial advisor to discuss your situation and help determine what you need to achieve your financial goals.

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