Preparing for Life Events

Surviving a Layoff

Losing a job is one of life’s most stressful events. There are both practical and emotional sides to losing a job. On the practical side, you’re faced with how you will pay your bills and find a new job. On the emotional side, you may feel ashamed, betrayed or angry that you’ve lost your job. It’s easy to become overwhelmed and take actions that may affect you for years to come.

On the other hand, in the long run, losing your job may open the opportunity for you and your family to pull together, do some of the financial planning you’ve been putting off, and perhaps even to find better paying or more satisfying work.

Financial Strategies

Many people underestimate the time it will take to recover financially from a job loss. They continue with their current spending, often using credit cards to fill in the gaps. But those debts can quickly add up and become unmanageable if it takes longer than expected to land a job at your previous pay.

Here are some financial steps you need to take to protect yourself in a job loss:

1. Find out whether you are entitled to unemployment benefits, and if so, how much. Visit www.dol.gov and click on “unemployment” for information on unemployment benefits and links to your state’s information. Find out the rules and apply immediately to avoid delays. Don’t forget that unemployment benefits are taxable as income. If you don’t withhold taxes on them now you may end up with a larger than expected tax bill come April 15th.
   
2. Check your benefits. Find out what kinds of severance you may get, whether you can keep the money you’ve accrued in a company retirement plan where it is, whether your company will offer job placement or resume writing assistance, and whether you have unpaid overtime or vacation pay that you’ve earned. If you aren’t leaving on negative terms, you should at least ask your supervisor for a reference letter and some suggestions for your job search.
   
3. Make a budget. This can be a real chore when things are good and worse when you are under the stress of a smaller income. But if you don’t have a good sense of what your monthly expenses are, it’s very easy to quickly run up a lot of debt. Visit Consolidated Credit’s Learning Center for a free budgeting guide.
   
4. Create a plan for your bills. If you believe you will have trouble making the payments on your bills, get help sooner rather than later. If you wait too long you may make mistakes that lead to bankruptcy. You can try calling your creditors to work out a lower payment arrangement on a temporary basis, but keep in mind that if your unemployment stretches out longer than you expected, they may not be sympathetic. It can be very helpful to get the assistance of a non-profit credit counseling agency like Consolidated Credit, which can work with your creditor on your behalf so you can focus on your job search.
   
5. Stay insured. If you were covered by health insurance, you may be able to continue your coverage under COBRA. You’ll likely have to pay the entire premium, plus a 2% administrative fee, but it can be better than going uninsured. It is also a good idea to talk with an insurance agent about your options for getting temporary or individual health insurance, which in some cases may be cheaper than COBRA. For more information on health insurance options, see Consolidated Credit’s free brochure, Cutting Healthcare Costs.
   
6. Make contingency plans. While it may be difficult to think about, consider your contingency plans if you can’t find a job soon at your old salary. Do you have assets you could sell (a boat, or an extra car, for example?) Could you downsize to a less expensive home? Do you have a cash value life insurance policy you could tap? Just be careful that you don’t wipe out everything you own without getting a professional review of your options. Raiding your retirement funds or tapping your home equity to pay the bills may seem like a good idea at the time, but if your job loss extends longer than you expected you could end up with nothing to fall back upon.
   
7. Get creatively frugal. Look at each expense and see where you can make changes until you’re back on your feet. Eating out, for example, may seem like a necessity when you are busy working but could be stopped while you have more time to shop and cook. In Consolidated Credit’s Learning Center, you’ll find several free brochures to help you cut costs in common budget areas like food, vehicles, and energy.
   
8. Ask for help. Many people who have worked hard all their lives are ashamed to ask for help from government and community agencies when they need it. Don’t be. You pay for that help when you are working through your taxes and the money you give to support charitable organizations. Find out what resources are available in your community and get the help you need.
   
9. Temp it. Temporary work may not be your first choice, but it can help pay the bills. If you treat it like a “real job” you may even be asked to stay on after your assignment is over. The best part about temping is that you get to try out different employers and jobs without making a long-term commitment.
   
10. Understand your options. Learn what your options are if you can’t make your house or car payment. You should always talk with your creditors before you fall behind, but understanding what can happen in those situations may help alleviate the fear of the unknown. Visit Consolidated Credit’s Learning Center for free booklets that explain these topics.