Have you recently experienced a job loss? You’re not alone. In recent weeks, companies have been trimming their workforce.
Many of these companies increased their labor size due to the pandemic which saw many years of demand brought forward. However, faced with biting inflation which is slowing consumer demand, coupled with the possibility of the economy sliding into a recession, companies are no longer able to maintain the same workforce as they did two years ago. As a result, many people have been let go from their jobs.
For those who suddenly find themselves jobless, it can be confusing to figure out what to do with their finances. The reality is job cuts are part of the business cycle. Besides, you still need to provide for yourself and your dependents and meet your financial obligations.
Rather than wallow in regret, there are steps you can take to manage your finances and keep your head above water. We have compiled a list of things you can do to keep you on track till you get back into the labor market.
9 Financial Steps to Take if You Lose Your Job
1. Negotiate your exit.
When you receive bad news about your layoff, find out if you have some wiggle room to negotiate on severance and other company benefits. If you are in good standing with your company, ask your manager if you can get a few extra months of severance pay, and an associated extension to medical and dental benefits.
Alternatively, you can potentially delay your layoff by asking for an extension of your employment (and delay the layoff) by a few months. This is important for those close to retirement who may not get another job quickly.
Depending on your company, there may also be room to negotiate to stay on as part-time or as a freelancer.
2. Apply for unemployment insurance.
Given the recent wave of layoffs, you should file a claim as soon as you can as state unemployment offices may be overwhelmed.
Claims can be filed online or via phone. If you need assistance in any area, reach out to your state’s unemployment office.
If your application for unemployment benefits is accepted, carefully review the benefits information and next procedures. Typically, to continue receiving payments, you must prove that you still fulfill your state’s eligibility standards every week or two.
3. Evaluate your financial state.
Take financial inventory of your assets, investments, cash, obligations etc.
This is usually done subconsciously due to our deeply ingrained survival mode. Most people tend to analyze the state of their finances to ascertain if they can afford their lifestyle. Evaluating the state of your finances is critical as it would determine the next step you will take.
If you have enough money saved up as emergency funds, or other income streams, you may want to ease the pedal on your job hunt, and be flexible with your career choices.
If you don’t have enough, then you may want to take up more drastic actions such as finding a part-time job, borrowing, or selling an asset to raise the cash you need.
Taking financial inventory entails looking at your:
- living expenses
- cash
- investments
- debts
- other financial obligations
You can also check if you still qualify for benefits such as a company-sponsored health and life insurance.
4. Be strategic with your money.
Losing your job means one income stream is blocked.
This means money flow will drop. This is the time to be less wasteful and get strategic with your money. Apart from necessities and meeting financial obligations, any money spent should be channeled towards generating more money.
Also, be strategic with paying your bills. If there are discounts for necessities, you should take advantage of them.
For example, if you get discounts for paying certain bills early or bulk purchases, by all means, exploit them. The key is reducing the amount of every penny spent as this would go a long way in keeping your head above water.
5. Figure out which assets to sell.
If you are invested and wish to convert some assets into cash, knowing which assets to sell can be a delicate balancing act, due to tax implications.
You may have decided not to tap into your retirement contributions, but under certain circumstances, that’s the most prudent move to make.
Savers with Roth IRAs can typically withdraw their account contributions tax and penalty-free. Though there are some limitations to pre-tax IRA contributions that were subsequently converted to Roth IRA funds.
Roth 401(k) account holders can also pull out money tax- and penalty-free, under two conditions:
- The owner must be over 59½ years old and whose last contribution is at least five tax years ago. Early withdrawals usually attract an extra 10% penalty asides income taxes.
- If you are at least 55 years old and have not made any contribution in the last five years, the “Rule of 55” exempts you from an early withdrawal penalty. If you have long-term investments (investments held for more than a year) in taxable brokerage accounts, you can sell them for income at a preferential tax rate.
6. Leverage any past networks.
Updating your resume and sending out applications is a good strategy for getting back into the labor market.
However, building networks is equally, if not more important. Hopefully, you have built a solid network with other colleagues in the industry while you were employed. It’s time to leverage your professional connections to find opportunities.
You can activate networks from:
- union memberships
- business contacts
- former colleagues
- friends and relatives.
LinkedIn is also a very good place to connect and expand your network and scope.
7. Upskill.
If you have time on your hands and the resources, then you could consider getting that training or certification which you have been postponing because of your busy schedule.
A major benefit from this is that you can negotiate higher than your present pay because of the added skill. It also shows prospective employers that you have not been sitting around, but developing yourself.
8. Have a positive mindset.
Don’t tear yourself to shreds because you lost your job.
Understand that it is just a phase of life, and could be an opportunity to focus on other areas of your life that have suffered because of the job. Also, you can take comfort that the job loss was not due to your incompetency or any other fault. It is a cycle in the economy which will pass.
Use this time to reflect on what you could have done to get better. If there are colleagues on your team or unit that were spared in the wave of job cuts, look for traits that made them stand out to the employers.
Work on improving on those areas so you can be a better employee in your next job.
9. Perhaps it’s time to start a business.
For some, a job loss could be a wake-up call to be their own boss.
Perhaps you are one of such people that has been afraid to take the bold step into the unknown. Maybe you have had a skill or training which you could have not given thought to because of distraction from your job.
Your job loss could be life-giving you a shove into a new and exciting direction. You may never know until you try.
The Bottom Line on Dealing With Job Loss
One of the most stressful life events is getting fired or let go from your work, but there are things you can do to make the transition a bit easier.
Make sure you have some money, keep your resume current, get in touch with your contacts, and, if at all feasible, negotiate severance pay.
If you’re confident in your abilities as an entrepreneur, you can start a business and be your own boss.
Remember that a layoff is a great excuse to take stock of your life, give yourself a new direction and go after what you’re most passionate about.
