What to Do If You Suddenly Lose Your Job
The U.S. unemployment rate stood at 6.7% in November 2020, according to the U.S. Bureau of Labor Statistics (BLS). Although that statistic represents a decline from earlier in the year when the pandemic first hit, it still means that millions of Americans are out of work. If you’re one of those millions, you may be dealing with shock, grief, and anger, along with stress and anxiety, especially if you lost your job unexpectedly. However, we’ve got some tips to guide you through the next steps after a sudden job loss.
Get Your Finances in Order
Although there are emotional effects from losing your job, it’s the financial ramifications that can cause the most distress. In fact, unforeseen loss of income can deal a significant blow to your emotional health, so you’ll feel better if you can get your finances in order as soon as possible. Here are five important steps to take.
File for Unemployment
Filing for unemployment should be done as soon as possible. “It's even more critical to file for unemployment immediately during the pandemic, even if you're unsure if you'd typically qualify,” financial attorney Leslie Tayne, founder and head attorney at Tayne Law Group, a debt solutions law firm, told The Balance by email.
“In March, the CARES Act was signed into law, which expanded the states' ability to provide unemployment and expanded the requirements,” Tayne said.
So, even if you are an independent contractor, freelancer, self-employed, or a part-time worker, you qualify for assistance. However, Tayne noted that the federal aid of $600 per week from the CARES Act has since expired, and you will only receive support from the state moving forward, unless Congress passes another round of support.
To file for unemployment, you should contact your state’s unemployment office. Fortunately, most claims can be filed and processed online. “To keep the claim moving as quickly as possible, you'll also want to proactively gather important verification information like addresses and dates of your employment so you can provide them right away,” Tayne advised.
Review Health Insurance Options
You also need to determine if, and for how long, your former employer will continue to pay for your health insurance. “Inquire with your manager or HR representative in your company to confirm, as this can be different depending on the company, policy, etc.,” Tayne said.
Start working on alternatives for coverage immediately to avoid a lapse in insurance, which could result in expensive medical bills.
Where should you look for alternatives to your company’s insurance? According to Tayne, COBRA, Affordable Care Act (ACA) Marketplace plans, or Medicaid are three options. “COBRA will be offered to extend your current healthcare benefits, but is generally more costly since you no longer receive any assistance [with premium payments] from your employer,” she said.
On the other hand, Tayne said that the ACA Marketplace is likely to be a less expensive option because premiums are based on income and household size. Or, perhaps you can join your spouse’s employer-provided health plan. “Sometimes, you'll even qualify for free or lost-cost coverage through Medicaid as well,” she added. Contact your state Medicaid agency for questions about eligibility.
Move Your Retirement Funds
When you lose your job, you’ll generally choose one of three options for handling your retirement fund. “If you plan on returning to work as soon as possible, you may consider leaving your retirement funds as they are and then rolling them into your new company's fund once eligible,” Tayne suggested. “While you won't contribute anything during this time, you can retain your funds thus far.”
However, you will need to check your employer’s rules regarding your own retirement account to be sure about what you can do without incurring any penalties.
The second option is to roll your account over into your own individual retirement account (IRA) while you decide what you want to do longer-term. “This allows you to continue pursuing tax-deferred or tax-free financial growth and potentially have more substantial control over your assets and investment options,” Tayne explained.
The third option is to cash out of your retirement fund. However, Tayne advised thinking long and hard before making this choice. “If you cash out your retirement fund early, you will then be taxed on the entirety of the current amount,” she said. If under age 55, you may also face a 10% early distribution tax penalty. “This can satisfy an immediate need for cash, but impedes your funds' long-term growth and [leads to] tax loss,” Tayne added.
If you withdraw some or all of your retirement savings balance, the Internal Revenue Service (IRS) allows you to decide within 60 days of receiving the money whether to roll it over to a new employer’s plan or to an IRA.
The degree to which you cut your expenses could determine how long your finances will last while you’re between jobs, so leave no stone unturned. Andrea Woroch, a California-based family finance and budgeting expert, recommends negotiating and reducing your bills and using free services. “Call your service providers and ask how they can help lower your bill without changing your services,” she told The Balance by email.
To save on your mobile phone plan, Woroch recommends switching to a lower-allowance data plan because you can use your home internet for free (hopefully).
“Raise your car insurance deductible since you’re not driving as much and [are] less likely to get into an accident,” she said. “You can also get free video streaming service through your mobile providers; for example, Sprint is offering a free subscription to Hulu and Verizon offers six months of Disney+ for free. Or, you can stream digital content from your local library’s website for no charge.”
If you’re a renter, try to negotiate with your landlord for a reduced amount for a few months. Also, “if your rent or mortgage is high and you don’t have a roommate, consider getting one, or move into a smaller house/apartment that’s on the outskirts of town and will be more affordable—and also have lower utility bills,” Woroch said.
If you’re paying checking account fees, you might want to shop around. “Checking account holders who don't meet minimum balance requirements pay, on average, $15 per month, but there are plenty of free options out there,” Woroch explained. “And if you’ve recently been charged overdraft or insufficient-fund fees, call your bank to ask for those to be waived, since many will do so during this pandemic.”
Tap Your Emergency Fund Sparingly
Your emergency fund should only be accessed as a last resort. “It should be done with extreme caution and as little as possible,” debt solutions lawyer Tayne said. Before taking this step, contact your creditors to work out deferred or reduced payments for a few months.
“If you do tap into your emergency fund, it will cover the initial need for cash to cover your necessary expenses, but [you] should still consider having a long-term plan to replace the money you take out, so it isn't depleted,” she said.
Tayne also recommends exploring other local and federal relief programs such as SNAP (food stamps), Medicaid, and LIHEAP (the Low Income Home Energy Assistance Program), which are all available for you to seek additional assistance. “You can also pursue local United Way programs that will give you even further assistance in [financial relief] application and eligibility information,” she added.
Moving On to Your Job Hunt
Once you’ve taken emergency steps to cover your monthly payments and stabilize your financial life, it’s time to launch your search for a new job.
You’re competing with a lot of other people who may have also lost their jobs, so you want to stand out. “To impress hiring managers, applicants want to highlight their technical skills and soft skills, such as collaboration, communication, and dedication to excellence,” advised Sheila Murphy, president and CEO of Focus Forward Consulting, which provides career and business development coaching and consulting.
“Applicants should invest time assessing their strengths and weaving those skills into their resumes, LinkedIn profiles, and interview responses,” Murphy told The Balance by email.
Customize Letters and Resumes
Resist the temptation to create form letters and one-size-fits-all resumes. “After researching the company, you need to address how leveraging these skills will benefit the company—do this in your cover letter and interview responses,” Murphy said.
Practice makes perfect, and you’ll want to aim for that to stand out in a crowded field of applicants. “In preparing for interviews, download practice interview questions from the internet, draft answers to those questions, and practice their responses,” Murphy said. Additionally, Murphy advised that you should prepare some questions for the interviewer to demonstrate that you have researched the company and want to be a part of that organization.
Her views are shared by Michele Mavi, career strategist and founder at MonumentalMe.com, which provides professional development coaching for individuals and teams. “Communication skills are often what makes one candidate stand out over another one with a similar background,” she told The Balance by email. “To be impressive in an interview, you need to have command of your presentation and that usually comes with practice.”
Clean Up Your Online Presence
It’s also a good idea to clean up your online presence—and to make sure that you’re active on social media in a constructive way. “The things you post and the comments you make about important topics related to your industry can offer a hiring manager a view of you that goes far beyond what a resume can show,” Mavi said. “The intelligent and insightful commentary you post on platforms such as LinkedIn can create excitement about you as a candidate.”
When creating cover letters, revamping your resume, engaging online, and prepping for the interview, keep in mind what employers are looking for and what can hurt job seekers.
Use Your Networks
Murphy also said that most people find new jobs through their networks, not online postings or recruiters. In addition, she said that you’re more likely to receive an interview if a current employee forwards your resume.
Depending on how much is in your emergency fund, you may need some in-between work until you land the right job. “If you need to stay afloat financially, temp work or part-time work is definitely an option to consider,” Mavi said. “You never know who you'll meet in the process and there is always a chance it could lead to a full-time position.”
- If you lose your job suddenly, rapidly reducing your expenses is critical to how long your funds will last.
- Don’t let your healthcare insurance lapse, or you could end up with expensive medical bills.
- In a crowded field of job applicants, you can stand out by customizing your responses and practicing your answers.
- The right type of social media presence can help you impress employers.
- A job loss could eventually lead to a new and better career.