Losing your job can feel like falling into an abyss—and then having to drag yourself out on your belly through broken glass.
And that’s before you even start thinking about the financial implications of having your primary revenue stream cut off.
So while you’re searching for your next gig, here are a few tips to keep your financial life humming.
- Know your numbers. Make sure you know your fixed costs (rent, mortgage, debt or other expenses that will keep on coming regardless of your employment status). You can control your discretionary spending—like entertainment and vacations—but you’ll also have those that are semi-controllable (food, clothing, utilities). It is vital to track your spending and control what can be controlled right at the outset.
- Check your liquidity. This is where a robust emergency fund is the perfect safety net. How long can you continue to pay your bills before your situation becomes dire? Some people scoff at keeping a chunk of money in savings, feeling that they are better served with the money invested in the markets. But combine a down market with a lost job and those investments aren’t looking so attractive all of a sudden. If your liquidity is low, you might seek part-time work to fill in the gaps while you reposition your career.
- Take advantage of COBRA and other benefits. You are entitled to continue health insurance after separation under most situations. While you’re going to pay for the coverage, you can rest easy that you have coverage for 18 months and—in some cases—even longer. Don’t overlook unemployment assistance as well—it can help tide you over until you land your next job. You might also have life or disability coverage that you can take with you and pay personally. This can be critical if you have a medical condition that might impact your ability to obtain coverage on your own. Pay close attention to the costs of continuing your current coverage to plans available in the marketplace.
- Retirement plans. If you’ve been saving in a company-sponsored 401(k) plan, you are entitled to transfer the funds to an Individual Retirement Account without any tax consequences. If you have a loan against your 401(k), you either have to satisfy the loan before transfer, or be prepared to include the loan as income; penalty included. If your company has a profit sharing plan, you are entitled to your vested Any unvested amounts go back into the plan. If you were covered under an increasingly rare Defined Benefit Pension, then make sure you check with your HR department about whether you are vested and to what degree.
- Your personal RF—Resilience Factor. If you find yourself in the throes of depression or other debilitating mindset, seek professional help. Being dealt a blow to your income, not to mention your self-esteem, can be crushing for some; for others, it becomes a positive mission of self-awareness, self-improvement and determination to rebound from a loss. A qualified therapist can help you arm yourself with the tools you need to shift into a positive direction. Resilience is an important trait to build on so it will support through the challenges that future life transitions present.
Being prepared—both financially and emotionally—for a possible job loss (like any life transition) is critical to your long-term goals and desires for security and happiness.
But it doesn’t happen by accident. Why wait for an actual loss to start planning?