7 financial steps to take after losing your job
What is happening
With the economy slowing, companies have started laying off workers, and some economists say the trend is set to accelerate in the coming months.
why is it important
An unexpected job loss can be an extreme financial and emotional blow to you and your family.
Protecting your finances following a layoff requires being vigilant, proactive and taking certain actions in a timely manner.
Businesses are grappling with major financial headwinds, including recent study by the recruitment firmInsight Global, which surveyed 1,000 workers, nearly 80% were concerned about job security., and declining consumer demand for goods and services, especially those that surged at the start of the pandemic. Meanwhile, employees are preparing to bear the brunt of a potential recession: layoffs. According to a
In June, notable companies, including Redfin and compass issued hundreds of pink slips. Layoffs.fyi, a website that tracks downsizing at tech startups, recorded nearly 37,000 layoffs in the second quarter, more than tripling from the same period last year. Yet, curiously, the seems relatively stable at the moment, with unemployment remaining low at 3.6% and hirings above expectations last month.cryptocurrency trading platform and real estate companies
But as the economic challenges worsen, more job losses are likely on the horizon. “We will see layoffs increase more significantly and on a much larger scale than what we have seen so far,” Guy Berger, senior economist at LinkedIn, said in an email. “We’ll see a lot of companies across a wide range of industries letting people go.”
Suddenly finding out that your position is being terminated through no fault of yours isn’t just financially disruptive: it’s emotionally devastating. When I lost my job as a financial correspondent in 2009 during the Great Recession in a company-wide layoff, I first went through a phase of shock, then I questioned my self esteem. And while help is available, I’ve learned that the only way to ease the pain and ensure financial well-being is to take crucial action on your own.
Here are some tips for securing your finances and getting back on your feet after a layoff.
1. Understand the fine print of your severance package
If you were a full-time employee, you could receive a severance pay which includes maintaining the salary for a certain period of time. Although employers are not legally required to provide ongoing compensation, severance pay can help minimize grudges and avoid lawsuits. According to Human Resource Management Company, the average severance pay is one to two weeks of your salary for each year of service. So if you had a two-year run, you could get up to four weeks’ pay.
Before signing a severance agreement, make sure you have answers to your questions from your human resources department. You may also be able to negotiate for more benefits like extended health care or access to job placement services. But don’t take too long: severance agreements usually need to be signed within 21 or 45 days, depending on your age and whether your position was terminated in a mass layoff.
Avoid signing waivers without fully understanding the terms or consulting an employment lawyer, especially if you have experienced discrimination in the workplace.
2. Apply for unemployment benefits immediately
As layoffs mount, states may find it harder to process unemployment claims in a timely manner. You must apply for unemployment benefits in the state where you worked, and the sooner you apply, the better. Although each state has its own eligibility criteria, you can generally apply if your employment was terminated through no fault of your own. The Ministry of Labor has a list of all state application websites. It usually takes two to three weeks after submitting an application to receive benefits.
3. Secure health insurance
If you received a health care plan through your former employer, it’s easy to assume you can’t afford it on your own. Although it can be expensive, it is essential to make it a priority in your budget in case you have an emergency or need an expensive medical procedure between jobs. One in four Americans say struggling to pay medical billsand several studies cite medical debt as a main cause of bankruptcy.
You may be able to continue to receive the same coverage by a federal program known as COBRA up to 18 months. Although this option may be convenient, it is because you will cover your share as well as the contribution of your previous employer. A 2% administration fee is also added to this. Employers must provide laid-off workers with a COBRA election form within 30 days, and you will have another 60 days to apply. Coverage begins on the last day of your employment or the day after your employer-sponsored benefits end.
It might be cheaper to be added to a partner’s group health insurance plan. The insurance plans on the health insurance market are also worth considering. Although the open enrollment period is usually in the fall, if you lose your job at any time and expect to lose your coverage within 60 days, you may qualify for a “special enrollment period” due to of job loss.
Finally, if you are a member of a union or professional organization, or are taking part-time classes at a local college, you may be able to access more affordable group health insurance through these networks.
4. Review non-fixed expenses
Losing your job immediately puts your variable expenses in a new light. Do you need that monthly subscription or that streaming service? Can you cut $50 off your monthly food and drugstore purchases by buying generics? When you’re unemployed, more money in the bank means less stress.
Cutting out these expenses only takes a few minutes. After I lost my job in 2009, I contacted several customer loyalty offices, including my gym and my cable company, andor temporary account freezes. I managed to save a few hundred dollars a month with these quick phone calls.
While you’re at it, call your creditors. If you think you’ll have trouble paying your monthly credit card bill or any other debt, it’s best to be proactive now and ask for other payment options while your account is still in good standing. During the pandemic, the Consumer Finance Protection Bureau encouraged banks and credit card companies to work with customers affected by COVID-19 and provide financial support, including and loan extensions. These assistance programs may continue to be available, and individual lenders may even offer their own unemployment protection programs.
If you need more advocacy, contact a nonprofit credit counseling agency like the National Credit Counseling Foundation.
5. Protect your retirement account
A layoff can also mean losing the ability to contribute to your retirement account at work like a 401(k) or 403(b). You won’t lose the money, but you will have to make some decisions to protect your savings. During the transition, it is essential to understand your options, follow the instructions and meet certain deadlines.
You usually have three choices. The first is to cash out the account. This option may be more attractive if money is tight following a layoff, but it comes at a price: withdrawing your savings before age 59½ can result in a 10% penalty. You will also have to pay income tax.
The second option is to keep your retirement savings intact until you decide to transfer the funds somewhere else, such as your new job’s 401(k) plan. However, if the account total is less than $5,000, it may be closed after a few months and your employers will send you a check for the amount. This, again, can trigger taxes and early withdrawal fees.
The third option is to transfer your savings to your new employer’s plan or to a. This can provide more control over the account and the ability to continue contributing. If your account has less than $5,000 and you don’t want to risk being “cashed out,” this decision may be best.
6. Keep the door open with a former employer
Following a layoff, it’s normal to harbor resentment or other negative feelings toward your former employer. But it may be a good idea to keep the door open and stay on good terms. Stephanie Nadi Olson, founder of We are Rosie, a placement firm of independent marketing experts, has seen a number of employers rehire employees laid off during the pandemic on a contract or part-time basis. “Some companies were choosing to say, ‘Hey, we hate having to make this decision. We want to keep you in our work ecosystem.’ So they continue to have access to that talent,” Olson told me on my podcast in june. If a layoff prompts you to move into consulting work or a more flexible schedule, returning to your former employer on a contract basis may be a possibility.
7. Work in a sector in difficulty? Consider applying your skills elsewhere
Companies in sectors that have benefited from the spending booms caused by the pandemic, such as technology, crypto, e-commerce and real estate, are experiencing a period of cooling and are leading in layoffs. If you work in one of these industries, remember that your skills and experience can be transferred to other types of businesses, such as customer service, sales, marketing, engineering or project management. Just because you’ve spent your career working in the tech industry, for example, doesn’t mean you’re limited to working in that field forever. Ultimately, if you have a proven track record of problem solving, effective communication and getting results, these skills can be transferred to a multitude of positions.
Consider expanding your job search to new industries that need new recruits. According to a report published in June by the United States Chamber of Commercesome of the sectors that are seeing a higher rate of job vacancies include hospitality, catering, education, healthcare, and wholesale and retail.