Losing your job is undoubtedly one of the most stressful things anyone can go through. Not only do you now have to cope with the sudden loss of your income, but it can also be an overwhelming challenge to organize your finances and create a new budget.
If you are wondering what to do after you lose your job, taking life one step at a time is the answer. The sooner you create a plan, the smoother your transition will be.
Here are 10 financial moves to make now when in between jobs.
1. Apply for Unemployment Benefits
It may seem daunting to file for unemployment benefits, but you’ll need to be proactive and complete all the necessary paperwork you may need sooner rather than later. You’ll want to ensure you do not go a long period of time without being paid, and you typically will have about two weeks from your layoff or termination date to get your last paycheck.
Unemployment will cover a percentage of your annual income last year, and there is a cap set by state governments on the maximum percentage you are eligible for. While your unemployment benefits may not completely replace your full income, knowing that you will still have a steady stream of money coming in to help you cover your necessary monthly expenses will enhance your peace of mind. It’s important to know that with an increase in unemployment claims due to the Covid-19 pandemic, it may take many weeks to receive your first check, so it’s best to apply as soon as possible.
Keep in mind that you do have to file for benefits on a weekly basis, so make a habit of doing so and reminding yourself when your claim is due. If you don’t re-apply, your payment will stop abruptly.
2. Don’t Let Your Emotions Take Over
We understand that this may seem easier said than done, but don’t let your emotions take over and cause you to make irresponsible financial decisions. It may be your first gut reaction to take money out of your Roth IRA or your 401(k) investment fund, but doing so may be detrimental to your future plans. While this may seem easier said than done, know that in the long run, keeping your retirement account untouched will benefit you greatly. Plus, you may not even have to rely on these accounts as a source of income; creating a new monthly budget and rearranging your other savings accounts and monthly savings can be all the change you need.
3. Create a New Monthly Budget
Preparing a new budget will help to give you comfort and calm during this stressful time. When you have a budget to stick to, you’ll feel in control of your expenses and aware of all your spending habits.
Start out by listing all the money you expect to come in when unemployed. If you are applying for unemployment, the Department of Labor has some calculators (depending on your state) that can give you a rough estimate of what to expect in weekly benefits. Add in your partner’s income, if applicable, and any severance payments you may receive.
Then, separate your expenses into two categories; the “must-haves” like rent, utilities, food, gas, insurance, and the “nonessentials” such as membership subscriptions to streaming providers, gyms, and eating out. Take a good look at your spending habits, and look for specific places where you can curb spending and simplify your costs. A retooled budget can reveal pockets of opportunities to help you save.
Even with this new budget, you’ll want to set aside savings, as you never know when you’re going to need a bit of extra cash. Even if it is just five dollars a week, put it away into a fund where you won’t be tempted to cash out, so you can have it saved in case of an emergency.
4. Cut Out All Unnecessary Purchases and Subscriptions
Take this time to take a long, hard look at all of your finances and your spending habits. Chances are, you are paying for some subscription services that you hardly use, as well as spending a ton of money on “extras” that you can live without. So, we recommend cutting out all these expenses, as hard as it may be. Cancel all the subscriptions that you don’t use daily, and focus your spending on just the necessities. This doesn’t mean that you have to go completely without some things that bring you joy, but making this switch can save you hundreds, if not thousands, every month.
5. Look Into Debt Repayment Plans
Just because you may not be able to make your predetermined debt payments does not mean you should default on your loans. Doing so can dramatically decrease your credit score, which can be exceptionally hard to recover from on a limited income.
There are some options available for you when it comes to debt repayment. Creditors tend to understand when you find yourself in a compromised position such as this, and if you reach out to them with details about your situation, you most likely can negotiate a different repayment schedule than you currently have.
Additionally, federal student loan repayment has income-based plans available for you. If you are approved, the new amount that you owe can go into effect as soon as the following month. All you have to do is apply.
6. Save Extra Cash to Use on Your Job Hunt
In today’s competitive job market, you’ll want to stand out in any way you can. Paying a professional resume creator to review your skills and enhance your resume can be a fantastic investment. You can also use a professional writer to craft your cover letters, thank you notes, and follow-up emails.
While you may question the use of your limited income on this expense, think of how a bit of cash upfront can set you apart from others and get you back into the workforce as soon as possible.
7. Review Your Medical Insurance Coverage
It is important to quickly replace your insurance plans as soon as your employer-sponsored coverage is over. You will be eligible for COBRA ( the Consolidated Omnibus Budget Reconciliation Act) coverage up to 18 months after you lose your coverage, which is the ability to stay on your current plan, even if you are not an employee anymore. However, you will now be responsible for all the health care premiums out of pocket, which can be quite costly.
If COBRA is not an option for you, you are eligible for affordable medical coverage through the Affordable Care Act, also known as Obamacare. Learn about your medical coverage and marketplace options here.
8. Roll Over Your Retirement Savings Into a New Account
Don’t forget about your retirement savings account! It is a common misconception that your employer-based retirement account will roll over into a separate account when you leave your job, but this isn’t the case. That money is rightfully yours, so do not forget it when you sign your termination papers.
For that money to move into your possession, all you have to do is open up another qualified bank account. This will allow your employer to disburse the money directly into your new account. You won’t have to worry about paying taxes as when the money is rolled over as it will not be seen as annual income.
9. Network Your Heart Out
There are so many networking tools available to you, so use them to your advantage! The social media platform LinkedIn was made for professionals to connect, network, and post job opportunities. So create a profile, join different networking groups, advertise that you are looking for a new opportunity, and message job recruiters for some extra guidance. Or, you can even reach out to an old colleague for a mentorship.
You never know who in your network knows of someone who has an opportunity you may be looking for. Best of all, it is free!
10. Contact a Financial Advisor at Second Opinion Partners
At Second Opinion Partners, our Team is here to help you navigate job transitions. Over the past 30 years, we have helped thousands like you create customized financial game plans to help them through this uncertain time in their lives. We understand that your financial situation is unique, and we will use our experience to help you move forward with clarity and confidence.
When you speak with our Team, we’ll guide you through the process of creating a budget, how to handle employer retirement options, and transition you and your family to new insurance plans, while protecting any potential tax liabilities. We are here to answer any and all of the looming financial questions you may have and to ensure the transition after you lose your job goes as smoothly as possible.
The Team at Second Opinion Partners is here to help you create a plan of action on how to best use your savings, so you are financially secure for both now and in the future. Ready to get started taking back your financial life? Schedule a consultation with the Team today.