You weren’t expecting it. The human resources manager called you into her office and gave you the bad news. A feeling of panic overwhelmed you as she reviewed your options for dealing with your retirement savings, a severance package, and other company-specific policies related to such things as rehiring, non-compete agreements, and references. Losing your job is not only a shock to your confidence but also to your finances.
Here are the actions you should take when you experience a job loss.
File for Unemployment
To minimize the gaps in your income, file for unemployment immediately. Processing can take several weeks depending on whether the application is completed correctly and benefit eligibility. Maximum benefit amounts vary by state. In many states, 26 weeks is the maximum time for which you can receive unemployment benefits. As of this writing, the maximum weekly benefit amount in Texas is $507. The timeframes and benefit amounts will vary based upon your past wages and whether you were laid off, fired or whether you quit.
Downsize Your Budget
When you lose your income, avoid trying to maintain your previous lifestyle. Now is a good time to draw from your savings or emergency fund to pay for necessities like food, shelter, and utilities. To help your emergency savings last, you must update your budget by cutting unnecessary expenses and prioritizing your bills. Start trimming expenses by listing your paid services or memberships such as cleaning services, lawn care, satellite television, or gym memberships. Cancel or suspend them for now.
Next, prioritize bills that impact your credit. You’ll want to make sure you pay all of your creditors. However, priority should be given to those that can adversely affect your credit with one missed payment, e.g., student loans, auto loans, mortgages, etc. Don’t let your lack of employment affect your credit history. If you don’t have enough money to make the minimum monthly payments, contact your creditors immediately and let them know about your recent job loss. They may offer hardship payment plans that can help reduce the minimum required payment each month.
Maintain Healthcare Coverage
A healthcare emergency can send you into a financial tailspin, so join your spouse’s insurance plan, if that’s an option. Otherwise, take advantage of COBRA insurance through your former employer. If neither is a possibility, then access the health insurance marketplace for coverage options.
You should qualify for insurance at this time since losing healthcare coverage is considered a qualifying event. This means there’s no need to wait until open enrollment to sign up. While the cost for medical coverage can be more than you expected, the price of forgoing coverage can be worse. If you experience a major illness or medical emergency, this can send you into substantial debt.
Try to remain calm and don’t get discouraged. You’ll likely bounce back sooner than you might think. But, it’s best to get your finances in order before looking for another job. Stabilize your financial situation before you update your resume so you’ll be in a better position to make smart decisions during your job search. Visit the workforce development board in your state for employment resources.
If you need professional guidance as you weather the storm of lost income, reach out to our partners at Greenpath. A certified counselor can provide you with personalized assistance to create a budget that accounts for your decreased household income.
Written by Freelance Personal Finance Writer, Tracy Scott