Handling a Job Loss
You may have lost your job already, or it's something you're concerned about. Either way, the keys to surviving a job loss financially are to plan ahead, take stock of your income and cut your expenses.
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If you haven't been laid off, it's a good idea to plan ahead for that possibility. It's hard to know how long you'll be out of work, so to be on the safe side, prepare for at least six months of unemployment. You might find a job much sooner, but you don't want to be forced to take the first opportunity that comes along, especially if it isn't suitable.
Come up with a financial plan for unemployment, and design your plan with some flexibility to allow for adjustments if your situation changes. Circumstances can vary based on how long you're out of work, and whether unanticipated expenses arise while you're unemployed.
Prepare a Survival Budget
A big part of your unemployment plan is a survival budget. You might already have a budget you can use as a base, but your survival budget should be a bare-bones version of your regular budget. Include only expenses that are necessary to survive.
Your plan also should include an emergency fund that's equal to at least six months of living expenses from which you can draw to supplement other sources of income.
Lost Your Job? Find Some Income.
Taking severance pay in a lump sum gives you control over your money, but you may lose some employee benefits such as group health insurance. If you take your severance as a continuation of salary, you may be able to keep your benefits, but you'll be dependent on your former employer's ability to make payments to you.
Check with your local unemployment office to find out if you're eligible for unemployment benefits. You can generally receive at least 26 weeks of benefits (more in some cases) if you were laid off or fired.
Reduce Your Expenses
If you're unemployed, you may find your income won't support your current expenses. Aside from reducing your debt by selling big-ticket items like your car or house, there are other things you can do to minimize your living expenses.
One of your first considerations should be to identify and discontinue discretionary expenses such as magazine subscriptions, health club memberships, extra phone services, credit cards you don't use that have an annual fee and dining out regularly.
Increase Your Income
You've cut your expenses and spending as much as possible, but you still don't have enough income. Here are some ideas that might help you meet your expenses while unemployed.
Consider a part-time or temporary job. This will provide another source of supplementary income while you search for your next full-time job. And your part-time job could turn out to be your next full-time job – or at least it might lead to another opportunity with another potential employer.