Losing a job can be devastating. Even in a strong market, companies can go out of business or reduce payroll. Being let go can initially tug at one’s pride, and after a layoff sets in, it may cause individuals to start worrying for their financial futures.
While many people can survive and may even enjoy a few weeks of rest and relaxation after a job loss, financial concerns may surface soon thereafter. A 2017 GOBankingRates survey found that more than half of American adults have less than $1,000 in their savings accounts. Financial planners typically advise people to have at least three month’s worth of earnings socked away for emergency situations, like a medical issue or a job loss. Even though the survey also found more than a quarter (27 percent) of respondents have $10,000 or more saved, that might not be enough to survive a job loss for six months or more.
These strategies can help professionals who recently found themselves out of work avoid financial difficulties.
• Get references. Leave on amicable terms and ask your former employer for a reference. You should not burn any bridges, as a good reference can be invaluable as you look for your next opportunity.
• Live off of cash reserves first. Before cashing in investments or retirement accounts, tap your emergency fund first. If you have any tangible assets, like an unused car or a boat sitting idle, sell these items for cash to tide you over.
• Contact your credit card company. Many companies have programs designed to help customers facing financial hardships. Reach out promptly to let them know you may be anticipating missed payments. It is better if you initiate contact rather than going into default. The same tactic can be used for mortgage or rent payments.
• Assess your budget carefully. You naturally will have to make concessions that impact finances, particularly as it pertains to spending. Cut back on non-necessities like dining out, gym memberships, streaming subscriptions, and other luxuries. Avoid adding other new debt.
• Apply for aid benefits. There may be government benefits, such as low-cost healthcare or food subsidies, that can help you get through financial difficulties until you get back on your feet.
• Involve the entire family. It can be embarrassing to lose a job, but look to family for support. Children may not need to know every detail, but they can have a cursory awareness of family finances and understand they may have to cut back until Mom or Dad is working again.
• Prioritize saving. Lightning may not strike twice, but plan ahead for another job loss by prioritizing savings in the future.
A job loss can come as a shock. However, with level-headedness and smart planning, many people can avoid dire financial situations in the wake of a layoff.