So You Just Lost Your Job. Make These Money Moves First
The first few weeks after a job loss can feel excruciating—especially if you were caught by surprise and are now suddenly forced to scramble to figure out your next steps. Rather than wallow in fear or disappointment, now’s the time to be proactive and shore up your finances so that you’re in the best possible position to weather a temporary bout of unemployment.
Taking steps to bolster your financial position will not only help prepare you if your unemployment lasts longer than expected; it will also help you emotionally cope with the uncertainty by giving you a greater sense of control over your circumstances.
Here are seven proactive moves you should make as soon as possible.
1. Take care of basics. If you haven’t already, make sure your immediate financial needs, such as unemployment income and health insurance, are taken care of. If you worked at a company with at least 20 or more employees, you should be able to temporarily continue your current health insurance coverage under a law called COBRA; however, insurance under COBRA can be expensive. You will have at least 60 days to elect coverage and will be covered as soon as your old insurance ends. If your spouse still has employer-based insurance, you should have roughly 30 days to transfer to his or her plan. Or, if you plan to enroll in coverage through Obamacare, you’ll need to enroll within 60 days after losing your job—unless your job loss corresponds with an open enrollment period. In that case, your state may give you at least three months to enroll in a new plan.
Depending on your income, you or your loved ones may also qualify for coverage through Medicaid or the Children’s Health Insurance Program. You should also immediately file a claim with your state’s employment office so that you can start receiving unemployment benefits.
2. Set aside your severance. If you were given a severance package, set that income aside and don’t touch it unless you absolutely have to.
Don’t use it for funemployment vacations or even for basic expenses if possible. Unless you’ve already built up enough savings to sustain you for years if you struggle to find another job, you should try to save as much of your severance as possible—just in case you need to dip into your savings for longer than you expected. If you have a solid resume, you should expect to find a job long before your unemployment insurance runs out. However, it’s always possible that you will struggle to sell your skills to a new employer, or that the economy will flag while you’re still unemployed. Rather than think of it as a cushion, think of your severance package as an emergency parachute that you only activate after you’ve exhausted all your other options.
3. Do a comprehensive financial autopsy. Thoroughly examine every aspect of your finances. Remind yourself how much you have available in savings and investments. Open all your bills and add up how much debt you have remaining. If you don’t regularly track your spending, scan your financial records for clues to how much you typically spend on everyday expenses. Also calculate how much you will have available to spend now that you have less income coming in.
Look at your taxes and estimate how they will be affected by your unemployment and severance package. By the end of your autopsy, you should have a clear-eyed understanding of your new financial situation and what you will need to make ends meet.
4. Cut ruthlessly. After you’ve completed your financial autopsy, take a closer look at your monthly expenses and spending habits and look for opportunities to shave your payments or cut them completely. Think seriously about what you and your family really need to keep going during this emergency period and eliminate as many extra expenses as possible. For example, you could save a substantial amount of money just by cutting cable and consolidating the number of streaming channels you subscribe to. Similarly, you could give yourself more breathing room by cooking cheaper meals, running fewer errands or temporarily shrinking the amount you pay toward your loans.
5. Create a slimmed down budget. Make peace with your smaller income and eliminate surprises by setting up a comprehensive budget you can live with. If possible, your budget should be slim enough that you can live your life without charging extra expenses to your credit cards, but it should also have some room for small luxuries or indulgences.
6. Get comfortable with coupons, rewards, card promotions and cash-building apps. Now is the time to tap in to your inner deal-hunter. If you have good credit, you should have access to a number of money-saving benefits, including 0 percent balance transfer offers, promotional APRs and card rewards that can save you money on everyday expenses. If you’ve been hoarding card rewards, cash them in for gift cards you can use to pay for household supplies and other essentials. Or use cash back cards to pay for everyday expenses that you can afford to pay off in full so that you can collect some extra cash. You should also use your extra time at home to clip coupons, scour the Web for deals and download mobile phone apps, such as Ibotta or Checkout 51, that can help you get cash back for purchases you were already planning to make.
7. Invest in new skills. If you have a little money leftover after your expenses are paid and your savings are collected, use that money to buff up your existing skills or learn new ones that could help you earn more income in the future. Services such as Lynda or Skillshare offer tons of high-quality online courses. You may also find a helpful class at your local community college or find some free courses on the Web.