When you lose your job, your primary concern may be how the bills are going to get paid. While it’s a difficult situation, a job loss can be manageable with proper planning. Hopefully, you’ve saved money in an emergency savings account to help you through your period of unemployment. Even if you haven’t, there are some steps you can take to help keep your finances — and emotions — in good shape
Evaluate Expenses
Losing your job can be devastating but can serve as an opportunity to reorganize certain aspects of your life, says Alexandria M. Cummings, Financial Coach with Mind Over Matter Financial. Take a look at magazine subscriptions, rarely used gym memberships, and your cable package to determine what expenses can be cut. “You may not know what’s next. It’s time to take a long, hard look at your monthly expenses and figure out the minimum amount of money you can live on.”
Prioritize Insurance Coverage
If possible, it’s a good idea to have an exit meeting with your employer to learn which benefits, if any, carry over after your job loss and for how long. Make sure you know what options you have available if your employer will no longer be covering premiums.
Look for Supplemental Income
In the interim, as you’re looking for a new job, look at other ways to earn income and manage debt. Find out if you’re eligible for unemployment insurance benefits. Sell items you don’t use in a yard sale or online. Put your professional experience to use through consulting and freelance opportunities. They may not be full-time, but a few contract gigs may be able to help you get through the hard times. Once you’ve started earning supplemental income, you might take this as a time to explore new opportunities or even start your own business, Cummings says.
Don’t Touch Your 401K…Unless It’s Absolutely Necessary
Be very cautious about taking an early 401K withdrawal. You may have to pay a 10 percent withdrawal penalty if you are withdrawing before age 59½. If you choose to withdraw money from your 401K, you will also have to pay federal and state income tax on the amount withdrawn. In some instances, the IRS may waive penalties for hardship withdrawals — including certain medical expenses or preventing foreclosure on a primary residence.
Brush Off the Old Resume
Update your resume, and have a friend carefully review it. Also, check with your friends and former colleagues for any job openings or upcoming opportunities they may know about. Look at job boards, online postings, and company websites for openings in your field. As you prepare for your next role, consider these five job search tips that can help you in your hunt.
Making sure you have a plan to handle a major income loss is key. “This is a reminder of why emergency savings are so important," Cummings says.
