Could You Pay Your Bills If Your Paycheque Stopped?

Ask yourself a simple question: if your paycheque stopped tomorrow, how long could you keep paying the mortgage, the car loan and the groceries? For many working Canadians, the honest answer is a few weeks, not months.

Most of us plan for the big moments, like buying a home or saving for our children’s education. Far fewer of us plan for the possibility of being too sick or injured to work, even though it is much more common than most people think.

What happens when the income stops

A serious back injury, a car accident, cancer treatment or a mental health condition can keep you off work for months. During that time, your bills don’t stop. Without a plan, families often turn to credit cards, lines of credit or their RRSP savings, which can set them back for years.

Government and workplace coverage may not be enough

• Employment Insurance sickness benefits are temporary and replace only part of your income, up to a weekly maximum.
• CPP Disability has strict rules and is meant for severe, long-lasting disabilities.
• Group coverage at work often replaces only part of your pay, may be taxable, and ends if you leave your job.
• Self-employed people and business owners often have no coverage at all.

Three steps to protect your paycheque

• Build an emergency fund. Aim to save three to six months of expenses in a high-interest savings account or a TFSA.
• Check your current coverage. Find out exactly what your workplace plan pays, how long the waiting period is and when the benefits stop.
• Fill the gap with personal coverage. Disability insurance pays a monthly income if you cannot work, and critical illness insurance pays a tax-free lump sum if you are diagnosed with a covered illness.

Your ability to earn an income is your most valuable asset. Protecting it is one of the simplest ways to keep your family’s plans on track, no matter what happens.