Newly Unemployed? How to Get Your Money Situation in Order
Staying on top of your finances when you have a steady paycheck is one thing, but if you’re in between jobs, that’s an entirely different story. It may be far too easy to bury your head in the sand, and momentarily escape from your sorrows by stress-eating sweets.
When I was unexpectedly let go from a contract job a few years ago, for the first time in my adult life I was without a full-time job. It’s easy to feel like you’re life is spinning out of control, and to let your finances go on the fritz. However, there are things you can to get your money situation in order.
Here are a few steps to take if you’re newly unemployed:
File for Unemployment Benefits
While this may seem like an obvious one, you’d be surprised at how many people don’t bother to file for unemployment with their state’s unemployment office when they are laid off.
“Typically, anyone classified as a W2 employee [not an independent contractor] is eligible for unemployment benefits—unless they were fired due to gross misconduct, but it doesn’t hurt to file a claim anyway,” explains Dan Kellermeyer, president of New Heights Financial Planning. “Unemployment income won’t completely replace your wages, but your employer has paid for these benefits, so you might as well use them.”
The rules for claiming unemployment in the U.S. are essentially the same: you generally need to have earned a minimum amount in wages before filing an unemployment insurance claim through the state you live in, must be unemployed through no fault of your own, and are able to work and are actively seeking work. However, specific eligibility requirements and compensation amounts vary depending on the state you live in.
Because it can take a few weeks for your application to go through, you’ll want to file as soon as possible. You can start filing the day you get the pink slip.
Know What You’ll Get from Your Employer
You’ll also want to have a sit-down with your boss or Human Resources department check to see what do expect in terms of a settlement, salary and any bonuses, plus vacation pay and extension of any other benefits, recommends James Q. Rice, CFA of JQR Capital.
“Usually these are paid in a lump sum,” says Rice, “and depending on whether they’re paid before the end of the calendar or next year, could have tax implications.” The money you’re getting from your employer will help tide you over until you land your next job, and should be factored in accordingly.
Explore Healthcare Options
If health insurance was offered by your employer, you have 60 days to decide whether to continue coverage through COBRA, which extends your current medical coverage for up to 18 months. Note that it could take up to a month for your paperwork to get processed, and typically costs a pretty penny.
Otherwise, see if you prefer to elect coverage through the Health Care Marketplace. Losing a job is considered a qualifying life event, and thus you can enroll during a Special Enrollment Period. If you go this route, carefully review your plan to you know what the monthly premiums, deductibles, limits, co-payments are, and what exactly is covered.
Contact Bill Providers
If you might just by scraping by and anticipate difficulty in paying off your bills and credit cards, contact your cable and internet providers, the gas company and so forth to let them know about your situation. There’s a chance they may be able to offer you a temporarily discounted rate or clue you in on less-expensive options. For instance, I was able to get a promo rate for a year on my internet. And I opted for a cell phone bill with less data, at least until I got my bearings.
Reassess Your Debt
Take a look at your debt load. Would refinancing make sense and save you money in the long run? If you’re saddled with student debt, you might consider deferring or asking for a forbearance with your student loan servicer for the time being.
As for your credit cards, it’s super important that you at least pay the minimum amount due. Otherwise, your credit score will get dinged. If you think you’ll have trouble making payments on your credit cards, reach out to the issuer. Most credit card companies have what’s known as a Hardship Department, and they may be able to offer a hardship plan. if you’re in a financial bind. For instance, they could lower your interest rate, offer a smaller minimum payment, and lower your fees and penalties.
Note that the credit card issuer will look at every situation on a case-by-case basis. What they may extend to you may not be the same as the next guy. Also, you typically need to be in good standing with the credit card company to be considered. Reaching out to the credit card company before things actually go south is a sign you care and you’re responsible, and they’ll respond favorably to that.
Get Your Frugal On
Reassess your budget, and see which areas you can cut back on. I remember carefully going over each of my expenses and trying to resort to living circa college survival days. I biked and took public transit as much as I could. I cooked most of my meals, only bought what was on sale, and committed to a no-spend challenge on non-essential items.
Besides contacting all my service providers and utility companies to see if I could get a better deal, I also reviewed my insurance policies to make sure they were still relevant to my situation and needs. While I didn’t end up making any changes, you might find that because you’re not commuting to work, switching to, say, a pay-per-mile auto insurance plan might be a better fit for your current scenario.
Figure Out How Long You Can Get By For
Between the settlement amount from your old employer, unemployment benefits, and the cash you have stashed in your emergency fund, figure out how many months you can reasonably get by without a steady paycheck. “Knowing this number will make you feel less stressed, and not knowing this feels like panic for some folks,” says Ian Bloom, a financial planner with Open World Financial Planning. “ ‘Oh no, I need a job now!’ is worse than ‘Oh…wow. Okay, well I’ve got four months to figure this out.’ “
Take on Side Work
While you’re looking for your next job, take on side jobs to boost your cash flow. You never know, these “bridge gigs” could potentially land you your next opportunity. Because I had been moonlighting as a freelance writer while working full-time, I had secured enough work to pay for half of my expenses. And having that existing base allowed me to pursue more freelance opportunities, which gave me the confidence to foray into it full-time.
I also took on side jobs test proctoring and pet sitting. That was extra money that helped me get back and not feel so anxious while I tried to figure out what to do next. FYI: If you’re taking on side work, you’ll most likely have to report it to the unemployment office, which can affect how much you’ll receive in unemployment.
Figure Out Your Next Big Move
Yes, it can be deflating to your ego when you’re unemployed. Yes, you may feel a mixture of sadness, anxiety, and stress. But it could also be an opportunity to figure out what you ultimately want to career-wise and take steps to get there.
While the clock may be ticking depending on what your financial situation is, knowing you have a few months to figure out your next move allows you the option to do a career pivot, get your learning on, or explore work opportunities you weren’t able to do at your previous job.
While being unemployed has an emotional and financial strain, while it’s tempting to hit the “panic” button, take a breather and follow these steps instead. Doing all you can to help you stay on top of your money situation will help you feel like you’re back’s not against the wall. In turn, you can make the most of things, and potentially forge a new career path.
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