With today's economy, the loss of a job is a reality that has affected thousands of people. When you lose your job you are faced with a period of time when handling your finances correctly and making smart money decisions is critical to you and your family. If you had been investing money up until the time of your job loss you will have the benefit of more time to transition to the ranks of the unemployed while you look for another job. Unfortunately, most individuals live from pay check to pay check and can not afford to invest money for a rainy day. Either way, there are steps to take immediately to take charge of your financial situation.
Things You Will NeedNone
Take immediate steps to reduce spending. With less money coming in, take steps to reduce your household expenses. Review the items that you are spending money on each month and look for ways to reduce them. Examples are if you eat out several times during the week, cook and eat at home more. If you go to movies, rent them. If you have premium cable channels, take basic cable until you are back to work. If you mostly use your cell phone and rarely use a house phone, disconnect it. There are a number of things that can be completely eliminated and others that can be reduced to save money.
Evaluate your short term situation to see how much cash you have available and compare it to how much you owe on things like your mortgage or rent, credit cards, car and other loans. Add this to the expenses that you calculated in step one above and see how long you can make ends meet with the money you have.
Take advantage of any resources available to you to help find another job. Many employers offer outplacement services that include working with state and local agencies that provide job placement and resume writing services. If you belong to a union, ask what they can do to help you. Use any contacts that you may have networked with in the past, they may have leads to potential employment opportunities. Make finding a job your full time job.
Register with your states unemployment insurance office. Learn how much you can claim and how long you can expect to receive benefits. Health benefits will still be available through COBRA. COBRA is a federal law that provides for the continuation of health coverage up to 18 months after a job loss if you had been enrolled in your companies health plan while employed. Unfortunately you have to pay the full premium, (your portion and the amount your employer was paying).
Resist using credit cards. Also, if at all possible, avoid taking out loans against your 401(k) plan or even worse, withdrawing the funds. There are significant tax consequences associated with withdrawals. Generally loans have to be repaid within 90 days of leaving employment or they become subject to the same tax issues as ordinary withdrawals. You will have to pay both income taxes and a 10 percent penalty.
When you lose your job you are faced with a period of time when handling your finances correctly and making smart money decisions is critical to you and your family.