Coping with an Interruption in Income

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Whether you’re working or retired, an interruption in your income can cause stress and hardship. Fortunately, there are measures you can take to cope with the financial stress resulting from a redundancy, leave of absence, strike, disability, or interruption in benefit payments, and reduce the difficulties and anxiety associated with lost income.


When your income is interrupted

Interruptions in income can arise from a variety of personal or work-related circumstances, including emergencies and unexpected events. You may experience an interruption in your income due to:

A natural disaster, crisis, or other unexpected event. All can temporarily affect your income and ability to work.

Leave of absence. A leave of absence is time off from work without pay, often with the continuation of some or all benefits. When an employer imposes an involuntary leave of absence it is usually in an effort to avoid redundancies—spreading the pain of income loss among a set of employees but making each worker’s loss of income relatively small. Keep in mind that a reduction in your gross income also affects how much tax is taken out of your paycheck. Consider speaking with a financial adviser if your leave of absence time will add up to more than a few weeks out of the year.

Interruption in benefit payments. Changes to your circumstances can affect your unemployment benefits, and other services.

Redundancies. If your income has been interrupted due to a redundancy, you may be eligible for benefits. Much or all of the process can now be accomplished online. If you are filing an unemployment claim, be aware that administrators may expect you to be actively looking for another job, so be prepared to periodically submit documentation of your job search.

Strike. While going on strike means giving up your paycheck for a time, a union may have a scheme to compensate workers for some of their lost wages and resources to help workers cope during the work stoppage.

Disability. A work injury may entitle you to compensation benefits. A medical condition that prevents you from working may entitle you to disability benefits available through an employer or administered through the Social Security system.


Strategies to help you get through

New spending habits, adjusting your budget, and strategising to make ends meet during the time your income is interrupted will help you get through this stressful time. The sooner you adjust to these necessities the more control you will have over your money. Here are immediate steps to take:

Adjust your budget. If you have a personal or family budget, revise it to account for the reduced income. If you don’t, now is the time to create one. See the Money section on this website to help you get started

If you are eligible for unemployment benefits, apply immediately. It may take several weeks for your cheques to start arriving.

Cut back on unnecessary spending. Restaurant meals, entertainment outside the home, expensive gifts, and premium TV channels are just a few of the kinds of expenses to consider reducing.

Look for ways to cut costs on expensive items. Almost any item on your budget has savings potential. Could you drive a smaller, more economical car? Find less expensive insurance, or a less expensive phone plan? Could you share childcare with a relative or friend—or, if one parent is now retired, temporarily eliminate childcare? You may even consider relocating to a smaller home or less expensive area.

Avoid going into credit card debt. It’s better to cut your expenses than to go into debt by overusing credit cards, with their high interest charges. If you must use credit cards, never exceed your credit limit, always make monthly payments on time to avoid fees, and have a plan for paying off credit card debt as quickly as possible. Or even better, don’t use credit cards at all; instead, use a debit card, which draws directly from your bank account.

Find ways to earn additional income. Telemarketing, childcare, cooking, teaching, coaching, election work, census work, selling unneeded possessions, and renting extra space are just some of the ways you may be able to earn extra income. Just be careful not to sign contracts that you may not want or be able to fulfill.

Consider family resources. Family members who live nearby can sometimes help you reduce expenses, for example by helping with childcare. Before accepting a loan from a family member, however, consider carefully the expectations for repayment as well as your personal relationships. Remember that an income interruption is a temporary setback, but family is family forever.