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It’s an awful feeling to lose your job. You might have seen the handwriting on the wall. Or, maybe it was a total shock. Either way, losing your primary source of income is a devastating blow.
And if you’ve had that job for a long time, it can feel like losing part of your soul. You’ve got to tread carefully, so this catastrophic event doesn’t leave you in dire straits.
When it comes to your money, you need to get your financial house in order. You might be worried about how you’re going to weather the storm until you find employment again.
Calm down and take a deep breath. Meditate, or take a walk in nature. Rest assured there are things you can to do to lessen the blow until you get back on your feet.
Losing a long-held job might make you feel ashamed. But keep in mind that lots of people find themselves unemployed at some point in their lives. And hopefully, you’ll only be out of work a short time, so there’ll be minimal financial hardship.
But even if you expect your jobless state to be brief, there are things you must do to get through this period with your sanity intact.
The Support of Loved Ones
The loving support of family and friends can soften the blow of being suddenly unemployed. If you’re struggling emotionally and financially, seek them out for help.
Tell them if they hear of any work, let you know about it. They can also be references for you when you start filling out applications.
People try to protect their children by not discussing financial matters with them. But it’s wrong not to have this discussion with your kids.
You don’t have to let your children know every detail of what a job loss means. But at least clue them in on the basics, so they’ll understand the importance of cutting back.
Put it in a way they’ll understand.
Then, it becomes a team effort. For example, if you tell them just what they need to know about your financial circumstances, you can get them to buy into taking a vacation closer to home, rather than one far away.
Post-Employment Job Benefits
A job loss can kill your finances. To minimize the damage, you’ll need to get the money flowing back in as quickly as possible. There are certain benefits you may be entitled to from your employer when you lose your job.
Your employer should explain if you’re eligible for these benefits when they terminate you. But if not, check with HR.
Chances are good you’ll qualify for unemployment benefits.
In most places, those who’ve lost their jobs are eligible for up to 26 weeks of compensation. While unemployment compensation will only be a percentage of your previous salary, it can help you keep your head above water and avoid using up all your savings.
You don’t necessarily have to claim benefits right away if you still have money coming in. But it’s essential to apply for them as soon as possible to get the application ball rolling.
When you do, you can check that off your “to do” list and rest easy.
To make their determination, unemployment offices have to look at lots of documentation. One thing they look at is your employment history. They’ll look at the last 12 to 18 months of it.
And why and how you lost your job. Make sure you quickly fill out any forms they ask you to complete so that there will be no delays in the issuing of your check.
Whether you qualify or not depends on which state you live in and the criteria they use.
Usually, you either have to be entirely without a job or only employed part-time. You also need to be in a position to look for work and have worked in the previous 12-18 months. By filing right away, you’ll get any unemployment benefits you’re entitled to as soon as possible.
Some states make you wait for a specified period after you file, so it’s essential to immediately start the clock on the process.
Figure out if you’re eligible for severance pay. If you’ve been fired or laid off, employers will often provide severance pay based on the time you worked there.
If you get a severance package, your benefits won’t start until after your last paycheck. Your employer might give you a choice between a lump sum or a stream of payments. If they do, carefully weigh the pros and cons of both options.
The second option can help stretch out health insurance benefits. And it may help you budget better.
If your employer is going through financial difficulties, a lump sum might be a better bet.
Your Retirement Account
If you’ve lost your job, you no longer going to be able to contribute to your retirement account.
Eventually, you might want to roll over your 401(k) or 403(b) into an IRA. An IRA account might be preferable because you’re no longer with the company, and it’ll give you more control over your investments.
Or, you can wait until you find a new job and get a new employer-sponsored retirement plan.
And then, transfer over the funds from the previous plan. By working with each plan’s administrator, you can arrange for a direct transfer from one account to the other.
This kind of transfer is an excellent way to avoid taxes and penalties.
Check with the HR department to find out how they manage retirement accounts for former employees. For example, you likely won’t be able to contribute to the plan once you leave your job.
It’s also important to see how much of the balance is “vested.” Companies can reclaim vested contributions.
But don’t tap into your retirement funds unless you have to. It’s rarely wise to raid your 401(k).
Not only will it be a burden having to pay taxes on your early withdrawal, but you’ll also have to pay the penalty. And, you’ll miss on years of compound interest.
Once your employer cuts you a check for that money, you can never put it back, unless you take out a loan on it. But of course, this will be another monthly bill you have to pay.
If you received health insurance benefits from your employer, your benefits wouldn’t be accessible to you anymore unless there is a grace period to give you time to explore alternative options.
COBRA is an easy, but an expensive option to retain your health care coverage after your last day of work. You have 60 days after a job loss to apply for COBRA benefits. They last between 18 and 36 months.
If you’re relatively healthy and don’t have any chronic conditions, a bare-bones medical plan may help you save money while protecting you from catastrophic emergencies.
You can also ask your spouse if her employer will cover you, apply for Medicaid if your family has no other sources of income, or explore insurance options under the Affordable Care Act at healthcare.gov
A Weekly Budget
When you’re out of work, it’s imperative to seize control of your financial affairs. Add up your monthly expenses and create a budget to get a sense of how long you can stay afloat.
Turn this into a weekly cash flow plan. It’s not too challenging to come up with one—just multiply your monthly budget by 12 and divide by 52.
It’s easy to forget how you spent your money. That’s why you’ll benefit from dividing your budget into weekly increments.
What to Do About Debt
Sometimes when people lose their job, they’re eager to pay off what they owe because they don’t like having the psychological weight of all that debt over their head. Don’t do it!
If you use all your retirement funds to retire debt, you won’t have money to live on. And forget about loans. Without a job, you won’t be able to get one.
An Emergency Fund
If necessary, tap into your emergency fund. You need one in case you suddenly lose your income.
Be disciplined about only using an emergency fund for actual emergencies. If you’ve followed the advice personal finance experts, you have at least three months of expenses to tap into from your savings.
Ways to Cut Back
If you’re determined, you can make your budget work. To do this, you’ll have to eliminate big purchases. And, cut out unnecessary expenses like restaurant visits. Spend less of your precious cash while out of work by making the following lifestyle changes:
- CARPOOLING: By carpooling, you won’t use your car as much, and it’ll last longer. You won’t spend as much on gas. And, your car insurance premiums will be lower.
- SELL YOUR CAR: If you can find a way to live without a car, you’ll save tons of money.
- LOWER YOUR INSURANCE PREMIUM: What you pay for auto insurance is often based on how much you drive. If you’re not driving to work anymore, you may be able to lower your premium because you’re putting in fewer miles.
- CABLE TELEVISION: When you’re out of work, cable television is a luxury you can ill afford. Cut the cord and look for less expensive viewing alternatives.
- GYM MEMBERSHIPS: Put it on hold and work out for free.
- RESTAURANT MEALS: Cut them out, and you’ll save a surprising amount of money.
Your expenses should come down to rent or a mortgage, utilities, and an exceedingly modest food budget. But keep your internet and your phone plan. You’ll need them for your job search.
Remember that your lack of a job is only temporary. Staying on top of your finances will see the light at the end of the tunnel.
Do a financial assessment of how much money you have. And what your expenses are. With a little planning and lots of discipline, you should be able to pay your bills until you get back to work.
You might think you’re living frugally. But when you’ve lost your job, you’ve got to strip your life down to its barest essentials. You’re going to need to do some severe belt-tightening.
And then, do some more.
Separate wants from needs. You need food, shelter, health insurance, and some form of transportation. Before buying anything, ask yourself if it’s a necessity. Or, if it only would be nice to have.
Use coupons, buy things only when they’re on sale, lower the thermostat, and combine trips to save gas. There are innumerable ways to cut costs.
Over time, even small changes add up.
Talk to Your Creditors
By talking to creditors, you may get an extension on your loans. Or, they could reduce your interest rates. It may seem foolish to let those who you owe money to know you’ve lost your job. But, you’re more likely to get a deal that way.
It helps to be proactive. The creditor may be willing to discuss s minimum payment. They’re likely to be more reasonable with you if you tell them upfront, rather than waiting for them to contact you after you missed a payment.
If you have investments, you might want to think about using some for income. It’s not a good idea to immediately sell a large number of stocks or mutual funds, especially if they’re for long-term savings.
You certainly don’t want to do anything hasty.
Try shifting a part of your investment portfolio to bonds or dividend stocks. By doing this, you’ll earn a little cash for to help get you through your rough time.
If you find it hard to put food on the table without a job, think about applying for food stamps.
Some people think that the food stamp program is welfare. But, it’s run by the Department of Agriculture as a way to increase demand for food products.
You don’t have to be receiving welfare to qualify. The eligibility formula makes food stamps available to some people who wouldn’t seem poor to the average person.
If you have no income or a lower income because you lost your job, you should be eligible.
Help from Churches
Many of those out of work depend on the kindness of churches to survive. Churches help low-income families by giving them food from their pantries, clothing, and sometimes financial assistance to help pay their rent and utility bills.
They also help at Christmastime by giving away toys for children.
If you can’t keep your head above water, a local church might be willing to help.
Sell Your Unused Items
Earn money by selling things you no longer need on Craigslist. Craigslist has a vast audience of bargain hunters who are always looking at the listings to get a good deal.
It’s free to list your items. But sometimes it may take a while for your item to sell. To make the process faster, make sure you post a clear, good-quality photograph of what you’re selling. Set a deadline, and you’ll light a fire under potential buyers.
In the headline, clearly, state what it is you’re selling. Add specific details but keep it short. If it has any defects, be honest about listing them.
Research prices to see how much items like yours are fetching. Batch similar items together. For example, if you’re trying to sell girls’ dresses and shoes , put these together in one lot.
Looking for Work
While you’re working on your budget and waiting to hear back from the unemployment office, looking for jobs is a productive use of your time.
Whether you’re interested in a full-time, career-oriented job or a few freelance gigs, there’s nothing wrong with applying for work on job boards right away.
Make overtures to individuals in your LinkedIn network to see if anyone is hiring. The best way to get employed in a competitive market is to talk to people you know.
Contact experts you know and trust who may want to help. But try not to overwhelm them. Ask for 10 minutes of their time. And, stick to the 10 minutes.
Update your resume, with different versions for different opportunities. Update your LinkedIn profile too. These are things you should be doing anyway. But if you haven’t looked at your resume and profile in some time, do it now.
You don’t necessarily have to reveal that you’re between jobs. But it’s crucial to have up-to-date information on your skills and accomplishments.
Looking for work can be exhausting. So be patient and hang in there!
Decide with a Clear Head
But before you jump back into the job market, take some time to think about what you want. You won’t want to waste a lot of time getting back to work. But it’s essential to think about what you want.
Do you want to work in the same field? Or do you want to start your own business?
Don’t accept a job offer that’s not right for you.
It’s true that if your back is against the wall and you have no idea how you’re going to make your rent, you’ll probably need to get a job right away.
But If you become desperate and grab the first job that comes along, you may find that yourself back in the unemployment line sooner than you think.
Spending Too Much to Make a Great Impression
Resist the temptation to overspend during your job search. Despite what you might think, you don’t need a super expensive haircut and a Dolce & Gabbana suit when you interview for a job.
Be practical and realistic.
It’s fine to allow yourself to spend to make a great impression, but don’t spend too much.
And instead of networking during expensive business luncheons, consider meeting in coffee shops, which can be just as effective, but cheaper.
Help from Your Former Employer
Maybe you can handle a job search on your own. But if your ex-employer is willing to connect you with assistance, jump on it.
Outplacement professionals can help you update your resume, assess your skills to see which jobs will be perfect for you, and even help you with salary negotiations and interviews.
Your company might offer other services like workshops, resume writing services, and classes on how to conduct a job search.
Job Fairs and Unemployment Agencies
Check out job fairs and unemployment agencies. The hiring company pays agencies, so applicants never have to pay fees.
Different agencies specialize in different industries. Make an appointment to check out as many as possible to see which ones best fit your skills.
Agencies need to fill full-time jobs as well as a variety of assignments that are part-time, seasonal, or project based. The latter can put money in your pocket right now and add something new to your professional repertoire.
Some employment agencies even offer you insurance benefits while you’re working at one of their jobs.
And while you’re at it, scan the classified ads either in print or online. Online job search engines such as careerbuilder.com can be full of opportunities.
Wrapping it All Up
Losing your job isn’t the best experience in the world. It can be stressful and fill you with thoughts of failure and self-doubt. Friends and family who are supportive can help you get through the ordeal.
Careful planning can make an unexpected job loss feel like a minor bump in the road rather than a catastrophic event. Try to get some money rolling in again even if it’s not much in the beginning. Reduce your expenses to maintain financial stability.
And sometimes, losing your job can be just the push you need to find a career path that’ll bring you greater satisfaction than your old one.