Losing your job is one of the worst financial events that can happen. It can cause you to lose your vehicle, your home, and everything you’ve worked for during the course of many years.
While there’s no way to make yourself completely invulnerable to the tough financial outcomes of job loss, there is a lot you can do to be prepared for the possibility. Getting some basic things taken care of while you’re still earning a paycheck will keep you from encountering some of the worst money problems that can come from losing your job.
Know The Process
Most people don’t think anything about unemployment benefits until they need them. This can lead to delays and even denial of benefits, so it is very important that you have good information about how the process works, what evidence you need for your claim, and where to go to get started.
Remember that just because you may have previously filed unemployment, you won’t necessarily be doing things the same way the next time. This is especially true if you have relocated. The process for filing Texas unemployment will be different from filing in other states, so every time you move to a new state, you need to follow up.
Make sure that your loss of employment can’t be considered as a disability of some kind, which shifts you into a different type of benefit category.
Have A Plan
Being without work is a time when you really have to live frugally. While your monthly expenditures may appear to be at a level that will be safely covered by your benefits, you may have new expenses that will tip the scales.
Searching for a new job is one of those. You may be out considerable money for fuel, air fare, hotels, and meals to go for interviews. You may need to pay for new copies of professional certifications or to print new resumes. It’s worth noting that those expenses may be tax-deductible, but you’ll still have to pay them right now. There may be educational expenses you’ll incur to get yourself better qualified for work.
You also need to remember COBRA costs for your health insurance. Whatever comes up, be sure you know what you will have to sacrifice in order to get through the time that you’re without work so that you don’t rack up debt to family or credit cards.
While it’s best to leave savings and other investments alone, it’s better to use them than to face foreclosure, bankruptcy, or even high debt. Not every retirement plan can be accessed before a certain age, but certain ones can be used in hardship situations. You’ll want to make sure you understand whether you are taking a loan from the account or making an actual withdrawal, and you’ll need to understand the tax and financial ramifications of each.
Other assets may be more liquid, which can be good and bad. If you maintain a passbook savings account, you can quickly withdraw that money to help you get by. Just remember that these are static amounts; that is, a given amount taken out of savings goes against your balance and isn’t a cash flow like a paycheck, so if you are hitting your savings every month to make it through, you’ll eventually run out.
Most people struggle financially during unemployment not because they have to but because they haven’t made plans ahead of time. It’s a common mistake, because no one wants to think about what will happen if they lose their job. But the better you’re prepared, the easier the situation will be.
1 thought on “Financial Plans for Unemployment”
Great post! I just had with a former colleague of mine who is still struggling to find full-time employment. Makes me grateful for everything I have going for me right now.
The “Tap Reserves” section is most important to be mindful of given all the taxes, penalties and other implications involved.
It truly shows how your Net Worth isn’t quite what you think it is when it has to be converted to cash.