If you suddenly find yourself without a job, it's key to make sure you and your money are secure. It's all about taking care of yourself, not just your wallet, when times get tough. This means re-examining your monthly spending, making sure you have health insurance, and thinking about how you can up skill or learn new things to make yourself an attractive candidate for a tough market.
The importance of taking proactive steps to manage your finances during this time
The shock of a layoff can come with a rollercoaster of emotions, and it's perfectly acceptable to take some time to process the event. However, navigating financial uncertainty following a layoff requires a structured and proactive approach. Here are suggested steps and key actions to consider that gives you room for self-care and smart financial moves:
Step One: Initial Financial Steps and Legal Considerations
In the first week, prioritize understanding your separation documents and severance package if you’ve been offered one and any associated legal documents. Consult with a professional such as a lawyer if you feel it’s necessary. You should know what you're entitled to and any obligations you might have once you sign documents. Assess your savings and severance to determine how long you can cover your essential expenses without regular income.
One of the timeliest decisions that will need to be made is your health insurance lapsing. Get information on how long you will be able to keep your insurance as it varies by employer and plan. Use this short window to squeeze in an appointment and get an extended refill of monthly medication if needed. If you're one who opted for a health savings account, no need to worry, although your employer won’t be contributing to that account anymore, that money is yours and doesn't disappear with your job. Those contributions can still be accessed and used for qualified medical expenses while you search for a new job. On the other hand, healthcare flexible savings accounts, are different. These accounts vary by employer and may have a limited grace period on carry over or expire within a certain time. Check with your benefits team to get the details on your timeline to avoid losing money.
Step Two: Budgeting and Essential Expenses
During the second week, apply for unemployment benefits if you're eligible. These may not replace the entirety of your income as it was, but they can provide a temporary financial cushion that helps you maintain stability. Check on the types of insurance and assistance offered through state unemployment benefits. In the meantime, your budget will need to be adjusted and you should take a closer look at your expenses. Distinguish between essential needs, such as housing and groceries, and non-essential spending, such as trips or entertainment.
Keep up with rent or mortgage payments. Your home is often your most important asset, so make sure you can keep it.
Stay on top of high priority bills. If you foresee a shortage, reach out to your lender ahead of time as many offer grace periods, extensions, or payment deferral. This includes credit cards, auto loans and student loans.
Cut back on unnecessary spending. Look at what you're spending money on and see where you can cut back, like eating out less, pausing subscriptions, or canceling that gym membership and opting for an at-home workout regime.
Make a plan for food and groceries. Planning meals can help you save money and avoid wasting food.
Keep a small emergency fund. If possible, set aside a little money (typically R500 -R1,000 is advised) for unexpected expenses so they don't throw off your whole budget. If you don’t already have one, starting one before you need to is highly advised as it provides a safeguard in events like this.
Finally, your health insurance is always important, but it can be critical for some who relied solely on their employer insurance to cover costly medications and medical expenses.
Check your options, such as continuing coverage through your medical provider, government options, or eligible to join a family member's plan. Since job loss is a qualified life event, you may be able to enroll in your spouse's health insurance program.
Step Three: Retirement Rollover and Adjusting to Your New Normal
There are several time sensitive tasks will demand your attention. First, managing your retirement account. After a layoff, you may have to decide what to do with your retirement accounts, such as your retirement fund. If you don't provide direction , don’t panic, you won’t lose your contributions. But being proactive can ensure you stay on top of your funds. When navigating a transition from one job to another, a critical decision you'll face during this time is whether to transfer the funds in your retirement fund to a new employer's plan, retain it with your previous employer, if permitted, or transfer it to another tax-deferred account. It's important to recognize that automatic rollovers aren't standard across all retirement fund plans, and the ability to keep your account with a former employer varies based on the plan's specific regulations. This variability means that your course of action will be significantly shaped by the unique rules associated with your retirement fund.
Why the urgency to make a decision? Acting within this window allows you to ensure your retirement savings continue to grow.
Adjusting to your new normal The next task is as important as managing your finances– adapting to your new daily routine:
Redefine your daily schedule to include job searching, skill development, and networking. Establishing a routine brings structure to your day.
Revisit your budget weekly to reflect your current income situation. Continue to prioritize essential expenses and find ways to cut back on non-essentials.
Stay connected with former colleagues and industry contacts. Networking can open doors to new opportunities.
Invest in yourself by learning new skills or improving existing ones. Online courses and workshops - often offered for no or low cost - can enhance your employability. Check sites like LinkedIn Learning and Udemy for courses, or if you’re looking for career specific certifications then Coursera offers both paid and free options.
Take care of your well-being by setting aside time for activities that reduce stress and improve mental health, such as exercise, hobbies, or spending time with loved ones.
Steps Four: Job Search and Financial Strategy
In the subsequent months, you may decide to take some time before jumping back into looking for employment. If you have the financial cushion to do so, this can be a great way to refocus. But once you’re ready, keep track of job search-related expenses, as some may be tax-deductible including;
Resume creation costs like creating, printing or sending out your resume
Travel expenses when you are interviewing or looking for another job
Fees paid to an employment agency
Networking event costs that were related to your job search
Industry trade publication subscriptions or organization memberships
You should consult with your tax advisor to determine whether any of your expenses are deductible.
Resources, Networking, and Financial Management After a Layoff
A layoff triggers a flurry of immediate actions from finding a new job, managing daily expenses, and keeping your financial life on track. It's a time when short-term needs can easily overshadow critical long-term planning, including retirement savings and investment strategies. Yet, it's a balancing act between immediate actions with strategic financial planning.
Adapted from: Inspira
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