understanding financial security

Understanding Financial Security

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What is financial security?

Way back to when I was still a student, people in the Philippines have grown accustomed to calling someone who holds a managerial position or someone working in an office setting, “stable”. 

“Philip has a great office job, he’s already (financially) stable.

It is every parent’s dream that someday, their kids will earn a university degree so that they become financially stable by working in an office or as a manager in a restaurant or a retail chain.

There is such high regard to post-secondary education in the country where I grew up and gained my education. The Philippines has such a high literacy rate, sadly there weren’t enough jobs available so people can actually work at jobs or careers that their education has prepared them for.

In Metro Manila, there are a lot of sales associates in the SM Department Stores who are actually university graduates. These are the same students who have crawled their way up to a university degree. After finishing school, these students thought that they are now ready for the great life that they and their parents have sacrificed so much for but then it isn’t always the case.

The belief of being financially stable once you finish university (in the Philippines) rooted in the security of tenure that most regular employees enjoy. This means that you can no longer lose your job because you’re a “regular employee”. In most instances, this holds true, especially if you land a job with a government institution or a national/multi-national company, provided of course, that your employer doesn’t file for bankruptcy.

To the shock of most new Filipino immigrants, “security of tenure” doesn’t exist in Canada and if you were born here, this is probably the first time that you’ve encountered this term.

In Canada, your tenure is only as good as your last paycheck. Thank God for employment insurance (EI), without which will put most Canadians in financial difficulties two months after a job loss.

If you’re a new immigrant and you came from a country where your tenure is secured once you get through your probation period, understand that no one is indispensable here when it comes to employment. Personally, I only worked “real jobs” for probably a total of 1-year. I’ve moved from job to job, most of them were term or temporary positions, six months in the country, and I landed a good-paying job, totally not related to my accounting education but a good paying job!

After hopping multiple “survival jobs”, I finally landed a full-time gig with a TELCO (telecommunications) company as a field technician through an employment agency. This was my first ever high-paying job in Canada, and unknowingly, it was also my last real job. After six-months of climbing posts, crawling on crawl spaces, installing and uninstalling cable and internet connections, and drilling holes in people’s walls, I was laid off, together with 14 other “sub-contractors”.

We didn’t have benefits because we were hired as contractors, luckily I was able to accumulate more than enough working hours from my previous jobs to qualify for employment insurance.

That was my first taste of how insecure Canadians are in the workforce. I couldn’t believe that we were let go without any advanced notice, we were only told that it was our last day due to work shortage. And that’s about it! No such thing as security of tenure in this part of the world.

If you’ve been here for a while or if you were born here, you’ve pretty much grown accustomed to job loss and laid off, heck most Canadians just shrugs it off and move forward to getting another job.

A couple of decades ago, they say that you can find another job a day after losing your previous job. This no longer holds true nowadays, most people have to rely on employment insurance for a couple of months before they can get back to the workforce. And if you didn’t know yet, EI only pays 55% of your average insurable earnings.

Assuming that you don’t live with your parents, you may encounter difficulties trying to meet your financial obligations while on employment insurance.

When you cease to work due to a lay-off, your income from work STOPS. Unfortunately, the different institutions that collect money from your bank account on a monthly or bi-weekly basis to settle your bills, car payments, rent or mortgage do not necessarily stop.

If you have enough EI hours, you can get supplemental income for a total of 45 weeks through employment insurance. After a couple of weeks of receiving EI, you will start to feel the urgency of finding another job because in most instances, only receiving a little over half of what you make from work is not only disappointing but will quickly sink you deep into a debt hole if you have a high financial obligation.

Situations like this are where an emergency fund is sought after the most. Unfortunately, you can’t try to find an umbrella when it’s already raining. It just doesn’t work that way, you bring an umbrella so you don’t get wet in case it rains. If it’s already raining, it will be pretty hard to find an umbrella.

Being able to carry on comfortably for a couple of months, ideally one-year is an example of financial security. By being financially prepared for emergencies, you are financially secure.

There’s more to financial security than simply establishing a solid emergency fund.

Most Canadians aren’t financially prepared to finance serious life events that are beyond their control. While an emergency fund can help finance your temporary income needs, the funds may not be enough in case of prolonged income loss due to illness or injury.

In reality, financial security isn’t about having enough money stashed away because money is finite, and quite honestly, it does take time to build a comfortable cushion.

The purpose of an emergency fund is to help you fund temporary emergencies such as job loss (as mentioned above), car breakdowns, or necessary home repairs like a leaking roof or basement perhaps.

True financial security shields yourself and your loved ones against financial difficulties in the event that you or any one of the breadwinners can no longer bring income into the household. This may be due to a temporary setback, work-related stress, injury, illness, or even premature death.

Sometimes, there are things that may affect the financial well-being of our household. We don’t want them to happen but they do happen, hopefully not to you but if in case you ever get affected by any serious life event that may prevent you from doing what you do to earn a living for yourself and your loved ones. Your umbrella should be ready, so you and your loved ones need not get wet from the rain, especially when there’s a storm.

Well-rounded financial security covers the following:

  1. Emergency Fund (6 months to 1-year worth of income).
  2. Income replacement in case of injury or illness.
  3. Funds in case of a serious illness.
  4. Income replacement in case of premature death.

Ideally, you should have all corners covered, so whatever happens in life, you’re sure that you and your loved ones are financially secured!

If you don’t have a well-planned financial strategy that secures your and your loved ones’ financial well-being, we can help you set up a well-thought-out plan that protects your financial security. You can book an appointment with us here.

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