Handling an Unexpected Job Loss
Dealing with finances during a job loss
Losing your job for most people is something that is unexpected. Job loss is a scary chapter in life and hopefully is not something you have to face on a regular basis. If you do find yourself in this tough situation now is the time to reevaluate your spending habits and create a new lifestyle based on your current situation. The following are a few helpful financial ideas to take into consideration if you lose your job.
File for unemployment as soon as you receive notice you are being laid off. Receiving unemployment benefits does take some time, so make this a top priority. Being laid off from your current position does qualify you for the most part to receive unemployment benefits. However, voluntarily quitting or being fired from your job does not technically qualify you for unemployment. Check with your state to clarify on what does and does not make you qualified for unemployment benefits.
Your health is very important and it will probably be to your benefit to look into a health insurance coverage plan. Through federal law, the majority of workers are able to opt into the Consolidated Omnibus Budget Reconciliation Act, better known as COBRA. Being enrolled in COBRA you are able to stay on your employer’s health insurance up to 18 months, but it may be somewhat costly. A second option would be to consider signing up for a private health insurance plan if you are not covered by a spouse’s current health plan.
Cut any excessive spending, this includes anything from eating out, car washes or your daily coffee run. Scale back your spending habits to mimic your current financial state. Bargain hunting or using coupons can definitely be to your advantage during a job loss; checking the newspaper or even going online to download the latest store coupons will help you save. You may also want to consider downgrading your cable and cell phone plans, movie subscriptions, and gym memberships. Just keep in mind this “cut-back” in your leisure activities is only temporary and not forever.
Redesigning your budget to reflect your current financial state would be beneficial to you. Some items you may want to consider when developing your new budget is: How much do you have saved in your Rainy Day Savings™ Account (or any type of savings) and how long will it last you for? What income will you be receiving from unemployment benefits and or severance package? What bills will you need to be able to continuing paying (mortgages and utilities)? Developing a budget will help you save money in this stressful time and allow you take control of your finances. One account you may not want to crack open while in unemployment is your retirement fund. Although, this may seem tempting and like a good idea, it generally is not. Borrowing against your retirement fund will cost you about 10% in taxes for deducting money too early.
Dealing with a job loss is hard but it does happen. Talking to one of the Credit Union’s financial advisors may be helpful during a time of unemployment. They can help your prioritize your money and help guide you to creating a new financial budget.