As you scroll through the news headlines, predictions of a looming recession are becoming more frequent. If you were in the workforce during the Great Recession of ’08, you know the one word that usually follows “recession” is “layoffs.” Add in the rising interest rates caused by inflation, and many debt-heavy businesses are likely already looking at staff reductions.
Even if you feel secure in your job, crafting a strategy to deal with a hypothetical layoff never hurts. Doing so will help familiarize you with the steps to take, and you could assist friends and family members who aren’t so lucky.
The following guide will walk you through steps you should take if you face an unexpected job loss.
Part 1: The Mental Checkup
Finding yourself suddenly unemployed can send you into a panic. If you can afford to do so, take some time to get yourself back in the right frame of mind.
Clear Your Head
First, it’s important to remind yourself that layoffs are rarely personal. Personnel costs are usually a company’s largest expense, so it’s more of a numbers game that affects people at all salary levels. Second, don’t feel undervalued. The business hired you initially because they saw your merits – it’s their loss in having to let you go.
Focus on Yourself
Use this time to re-evaluate your goals. Perhaps this move is a blessing in disguise. For example, you might have been working at a job, but now you can pursue a career you’re passionate about, and that excites you.
Take a step back, recharge, and rediscover what you want from your next position. New opportunities will soon surround you, and you must be mentally prepared to act on them.
Part 2: The Financial Checkup
The tallest hurdle you’ll face when suddenly unemployed is managing your money. Even a short pause in receiving paychecks can throw your finances off track. However, with a bit of preparation, you can devise a plan to ensure you’re still able to meet your financial obligations.
Assess Your Finances.
Review all your current financial accounts. List the balances in your savings, checking, and investment accounts. Then, itemize your existing debts – from auto and home loans to personal loans and credit card bills. Your goal is to get a bird’s-eye view of your finances. If you received a severance package from your employer, factor in those funds as well.
File for Unemployment
Research the unemployment process in your state and file as soon as possible. These funds could provide much-needed relief as you begin your new job search. Even if you feel you can find another position quickly, it never hurts to start the process.
Review Your Healthcare Options
Employees laid off typically have the option to retain the same healthcare coverage for themselves and their families through COBRA. However, because your employer was likely paying at least a portion of your health insurance, COBRA plans can be costly when paying as an independent. Alternatively, many major health insurance providers offer temporary family plans that are much more affordable.
Revisit Your Budget
Spend some time going through your monthly budget. If you don’t currently use a budget, now is the time to create one. Review several months of past account statements to ensure you include all your monthly expenses. Then, begin looking for areas to cut back temporarily. Try to free up as much money as possible while pursuing new employment opportunities.
Consider Other Income Sources
If you have an emergency fund, now is the perfect time to put it to use. Next, you might explore liquidating some of your investments. If you decide to go this route, it’s wise to consult your financial advisor first. You’ll want to avoid pulling from tax-advantaged retirement accounts, if possible. Doing so can result in costly penalties, and you’ll be responsible for applicable taxes.
Use Credit Wisely
If you’re having trouble making ends meet, relying on credit cards can be tempting. However, the higher interest rates of traditional credit cards can create a debt cycle that’s hard to escape, even after you land a new job. If you’re considering outside financing to help boost your spending power, opt for a personal loan from the credit union. With lower interest rates and fixed monthly payments, you’ll generally pay less interest versus traditional credit cards.
Ask for Help
Sometimes finding a new job can take longer than expected. If that’s the case and you’re worried you might miss a loan payment or be late on a bill, don’t fret. Typically, most financial institutions and vendors (such as utility companies) have solutions to help those facing financial setbacks.
However, it’s vital that you contact the business BEFORE your due date for two reasons. First, they’ll generally have more options available the sooner you reach out. Second, their solutions could prevent negative marks on your credit report.
Keeping your finances organized during a period of limited income is crucial. Spend time reviewing your accounts, updating your budget, and creating a plan to manage your finances as you seek a new job. If your job hunt takes longer than expected, contact the credit union to explore low-cost financing options. Visit us at a branch or give us a call at 248-322-9800 extension 5 today.
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