Hopefully, you’ve been diligent in putting away a little something for a rainy day, because when it rains, it pours.

Layoffs and pay cuts make up some of the many challenges Canadians face during the current economic downturn, but many haven’t changed their bad spending habits. An RBC poll released in May 2008, found that 43 per cent of Canadians are maintaining their spending habits, while 20 per cent spend even more. Eighty-three per cent said they don’t save as much as they would like, and 55 per cent have only one month of expenses set aside, while 24 per cent have three months of worth set aside.

The holidays were no exception, with national spending up nine per cent over the period, according to Robert Abboud, an Ottawa-based certified financial planner at Wealth Strategies. He adds that the economy has lived on borrowed time for years, and now the proverbial chickens have come home to roost.

“The party’s over. It has been 17 years since our last recession. Time to snap into it, man, the reality has hit,” he said. “Canadians have to wake up and say, ‘OK, if I don’t have any income for the next three to six months, what am I going to do?’ And if the answer is, ‘I couldn’t survive,’ you’re in trouble.”

While you’re still gainfully employed — and most Canadians still are — now is the time to prepare for the worst, Abboud said. Pay down your high-interest credit cards and implement a spending freeze on everything you know you don’t need.

You may want to earmark some cash for an emergency cushion of at least six months — not an easy target, according to Abboud, who notes it takes two to six weeks for employment insurance to arrive, and even then, it may not match your salary. If you’re financially disciplined and you feel the need, you can apply for a line of credit with your bank, which is virtually impossible to do if you’ve lost your job.

“You want to prepare by paying down debt and building up cash,” Abboud said. “But from a savings perspective, it’s a great time to be either continuing your monthly savings plan or starting one up, especially if you have job security.”

The times don’t bode well for those prone to use plastic, as many still do. The RBC study found 65 per cent of those polled view credit cards or lines of credit as an emergency backup — a disturbing number, according to Abboud.

“Goodness gracious,” he said. “Credit cards are not viable backups if you have no job. A line of credit is the worst that you should do. It might have a seven or eight per cent interest rate, certainly not 18 to 26 as a credit card might. People need to stop thinking about the plastic and start thinking about the cold hard cash.”

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