For most working people, losing a job is one of our greatest fears. Unfortunately, no one is immune to layoffs, as companies merge job security isn’t as predictable as it used to be.
Although we advise maintaining an emergency fund that can last for six months, quite frankly, most people only think about this important factor after they have been laid off. So what do you do if you aren’t prepared?
Let’s take a look at some great financial steps that can help you deal with the temporary loss of income.
Apply for Unemployment Benefits
Unemployment benefits vary from one state to another. In most cases, you have to be demoted to part-time status or entirely unemployed to qualify for unemployment benefits. You also have to be in a position to look for more work.
If you’ve received a severance package, unemployment benefits will start after the last check. Nonetheless, it’s advisable to apply for the benefits sooner rather than later to make room for the next step. In most states, you can apply through email, phone, or entirely online.
To speed up the process, have all the documents prepared before the application. The unemployment offices will need your employment history the past 12-18 months, gross pay, other incomes, and your personal information.
Manage Your Health Insurance
Check with your former head of HR to know your health coverage status after the layoff. You may be given a grace period to pay for your current coverage yourself as you search for alternative health care options. You can also ask your spouse to inquire if his/her employer can add you and your family to their insurance during this time. If your family doesn’t have any other sources of income, apply for insurance through your state’s Affordable Care Act platform, or consider Medicaid.
Even if you are laid off outside the open enrollment period, you could still qualify for the insurance during a special enrollment period. The latter is offered to people who have recently moved to another state, lost a job, had a child, adopted a child, or got married.
Analyze Your New Financial Situation
Now is also a good time to develop a budget for yourself and your family that aligns with your new financial situation. How much are you bringing in or do you have any new expenses you will have to take on etc.? Answering some of these important questions will help you get on the right track.
Here are some questions to consider:
- How much liquid cash do you have in your savings account or emergency fund?
- Are there any payments coming up that can’t be paid with a credit card?
- What areas of your life can you cut back on (monthly memberships, entertainment expenses, frivolous spending, etc.)?
- What are your credit card balances? Which card has the lowest interest rates? You’ll have to survive on this if you don’t have any money.
- Will unemployment cover most or all of your expenses? If not, how else can you bring in income?
Getting these things in order can help to alleviate stress around the shock of getting laid off. Be sure to update all income and budget based details about your current finances.
Find Other Sources of Income
This is also a good time for you to start researching other ways to bring in extra income on the side, even if it’s low paying or part-time. Think about skills, services, and products that you can sell online or offer locally to get some cash flow coming into the home.
There are also plenty of apps that allow you to make money with low entry requirements, such as food delivery or renting living space in your home. Figure out what you have to offer and look for opportunities that allow you to bring in low time demanding streams of income.
Ask for Help
Don’t shy away from asking for help if you need it. Tough times fall on everyone so most people will be understanding and willing to help if they can. Besides your family and friends, other places you can get help include:
- Your local church- many churches have programs to assist people during hard times. Some have food pantries, while others can even provide temporary housing options.
- Social services- the rules of social services vary by state. Check with your state website to get all the details. You may qualify for Medicaid, food stamps, and other services that can offset financial burdens.
- Talk to your creditors- some creditors may extend your payment period or decrease interest rates. You’ll never know if you don’t ask.
Consider Other Retirement Account Options
Deciding on the way forward for your retirement plan is another important item to manage if you had a 401(k) through your former employer. If you want to have control over your funds, you may need to roll it to an IRA account or withdraw it (but be careful because early withdraw can come with a huge penalty if you are under 55).
It might be best to consider an IRA rollover account if you are no longer with a company. A personal IRA account gives you control over your investments.
Check with your HR Department for details on how 401(k) retirement plans for former employees are handled.
There are numerous other things that you can do to help move you forward. Take the time to update your résumé and start searching for a job with a fresh outlook. Be sure to include all your past duties and current skills. Finding a new job is a full-time job in itself, so be patient.
In the meantime, you may need to use your emergency fund to keep things going. However, don’t just tap your emergency fund for anything you don’t truly need. Use your emergency fund for expenses you can’t afford to pay based on your newly updated post-layoff budget.
Have You Been Recently Laid Off?
Losing a job can be a trying situation, but remember, it is temporary if you take the right steps to get back on track.
The best thing to do is to keep a positive mindset and attitude. For help with financial coaching and planning, contact us today to schedule a free consultation.