6 Ways to Financially Deal with Job Loss

robots

There is no doubt that losing your job would have a significant effect on you and your family emotionally, and you want to be able to deal with your feelings and look at the situation to find a way to recover professionally and get back to work, and you can’t do that if you are also worried about money. Therefore, it is smart to have an emergency plan in place in case the worst does happen, and make sure you know the steps to take to financially deal with a job loss.

Continue Education. Even if you have a job now but you are aware that your professional skills can be polished don’t hesitate to sign up for educational courses. For example, my friend Alice had a good job even though she didn’t have a high school diploma. She learned about the website MyCareerTools that provides free GED courses online and decided to use them. She got her GED certificate, however, these online classes are not for everybody, and some people will not benefit from them. It took her in all 6 months, and then she applied to college.  When she lost her job she was in the position to find another one because she took care of her education.

Be prepared. No one likes to think that they may be expendable to their boss, but the reality is that few jobs are secure and it is important that no matter how long you have worked in your current position or how qualified or valuable you are to the company, you consider these simple steps to make sure your finances could handle the worst:

Be prepared. In the same way that writing your will or taking out life insurance doesn’t invite bad fortune, nor will being prepared for job loss make you any more likely to need the safety nets you’ve put in place. Instead, by being prepared you will be able to think clearly and act rationally if you do lose your job, and you will be able to build a more solid foundation in a new role, from a position of strength.

Know your current financial situation. Make a list of your assets and your liabilities to build an overall picture of your financial situation. Being realistic will help you put in place valuable measures which could really help in a crisis, rather than assuming you’ll be fine for a couple of months if you lost your job, only to find your emergency fund doesn’t last two weeks.

Understand the stability of your job. Look at the industry you are in and assess how your competition is performing. Also look at whether your company has already been laying off other people, even if they’re not in the same department as you.

Find out about your company’s severance policy. If you do lose your job you will likely be thinking about a thousand things, but you don’t want to miss out on what you’re entitled to. Therefore, familiarize yourself with your company’s severance policy now so you know whether you should receive any severance pay, how that amount is calculated and whether your corporate health insurance benefits will continue. This will help you work out a clearer amount you will need in your emergency fund.

Build an emergency fund. Your emergency fund should be savings equal to at least six to eight months worth of expenses. The amount you need depends on your industry, your skill level and your risk level – for example do you and your partner work in the same company?

How to Financially Deal with Job Loss

If you do find yourself without a job, refer to these six simple steps to help you manage financially:

Spend your savings or severance carefully. Your severance package is designed to help you financially manage the transition from your old job to your new one, do don’t be afraid to use it if you were lucky enough to be awarded a sum of money. Just make sure you spend it carefully, paying for the most important things first such as your mortgage, car repayment, utilities and groceries. If you do also have to dip into your savings, make sure you replenish your account when you can.

Apply for unemployment insurance. Unemployment insurance can pay you a benefit if you are out of work, while you are actively looking for a job. Just make sure you apply immediately because your benefits could be reduced if you wait.

Use your credit cards wisely. When you have lost your job your cash is irreplaceable, once it’s spent there is no more coming in next week. Therefore, while you tried to avoid living on credit when you were working, the opposite is now true when you aren’t working. You should therefore aim to use your credit cards in the short term when you lose your job because your minimum credit card repayment after you’ve bought groceries and paid the power bill is going to be a lot less than the total of the groceries, power bill and all the other expenses which would be eating into your cash reserves. With your cash protected you can maintain the minimum repayments on your bills and credit cards for a longer period and your credit rating remains in tact. This is a short term solution only, and when you find a new job you need to concentrate on repaying your debts fast.

Contacting creditors. It is important to contact your creditors if you are having trouble paying your bills, but don’t call them as soon as you lose your job, because your situation doesn’t concern them until you can’t afford to pay them. Only call or write to your creditors when you are sure you will be unable to make your payment, and then ask for a hardship program which allows you to make lower repayments, usually for three to six months. If your creditor doesn’t allow you to use a hardship program or if you still can’t afford the reduced amount, tell them you can’t pay until you find another job and a credit counselling agency may be able to help. Don’t simply ignore your bills, and remember that bankruptcy should be your very last resort.

Cut back your expenses. Look ruthlessly at your monthly expenses and cut back to the bare essentials. If you’ve already done this in the past, do it again to make sure you haven’t overlooked any room there may be in your budget. Also make sure you obtain a copy of your credit report so you can be sure you haven’t missed any bills as your credit report is often checked by potential employers so you need it to be in tact.

Be organised about your job search. If you have taken all of the above measures you won’t achieve anything more by fretting about your finances. Instead, clear your mind and focus on finding a new job. Get up in the morning at the same time you would if you were going to work and be disciplined about sending out applications and following up on leads. Remember not to let the current situation get you down as it will pass and you’ll be able to move onto something bigger and better.

One thought on “6 Ways to Financially Deal with Job Loss”

Leave a Reply

Your email address will not be published. Required fields are marked *