Job loss are two of the most unnerving words put together since the time people started working for a living. For most people, it signals an end to a steady stream of income. It can also mean losing a sense of life security. For others, they even start to question their purpose in life and even their skill. Losing a job signifies a setback that can put you off-course as you reach your goals.
According to RT.com, 20% of American workers lost their job in the past five years. This can trouble a lot of people as it puts their job security at risk. There is no question that this is the number one source of income for an American family. Once you are laid off, you now face several hard decisions, especially with your finances.
There is the question of being a single income household for married couples who are both working. If you are still single then the question now is where will you get the money to cover your expenses. If you are looking at an imminent job loss, here are a few things you can consider to help you prepare for what is coming.
Increase your savings when faced with a job loss
There has never been a more opportune time to start thinking about your reserve funds as you do now. If you have been saving for the rainy day, your job loss can be likened to a storm. It will be one of the biggest financial challenges you will face. Your emergency fund would now be a pillar of strength for your financial need.
The reason why some financial experts would recommend saving up an amount that can cover six to twelve months worth of expenses is because of job loss. This is because this is usually the maximum length of time people would be in between jobs. While you are out looking for a new job, you are not getting in debt as you try to get by.
Tighten up expenses
This usually comes next after you learn about an impending job loss. You try your very best to cut back and work with a lean expense budget. CNBC.com shares that some people have equated emergency situations with borrowing money. While this is addressed by your reserve funds, you can make it easier for your budget once you cut down on costs.
Reassess your household budget and pinpoint what areas you can save up on. Can you brew you coffee at home before leaving for work? You might be able to save a few dollars a day which translate to a few hundred in a few months. Can you cut down on the number of subscriptions on your smartphone? Do you really need subscriptions to Pandora, Tidal and Apple Music all at the same time?
Call your lenders
One of the recurring themes when talking about job loss preparation is being proactive. One way you can do that is by calling up your creditors and letting them know of your situation. What you want to get out of this conversation are two things. One is to give them a heads up on possible changes in your finances. Second is to know what your payment options are in case you do lose your job.
This is also a good time to explore the possibility of asking for a reduction in your interest rate. Of course, this would work better if you have been making on-time payments. Your credit score could also be a factor in this negotiation. Your lender may or may not agree to this but there is no harm in trying. If they do then that would be a big help as you transition from one job to the next.
Check unemployment benefits
You might want to look up unemployment benefits when you do lose your job and it takes you a while to get a new one. The challenge in this is that the benefits differ from one state to another. The beauty is that technology has made research a lot easier. You can do it from the comfort of your own home using just your smartphone or other gadgets.
You need to understand these benefits because between them and your emergency fund, they might have to complement each other as you look for a new job. It is possible that you could get a new job in a matter of days or weeks. However, there is always the possibility of getting several rejections before you land a job. In such cases, you might have to depend on your reserve funds as well as unemployment benefits.
Make use of available benefits
If you have existing benefits in your current job, you might want to maximize the existing benefits you have before they are gone. Go and have the medical check-up that you have been putting off for the past few months. If covered in your benefits, see that dentist about that toothache you have been feeling on and off lately.
What happens to your 401(k)
Your 401(k) is one of the most important savings account you would need to prioritize. When you are looking at being laid off, check how your retirement fund would be affected. Normally, you can rollover your 401(k) to a new employer once you find a new one. You just have to decide whether you want to directly rollover the fund from one company to another or look at how your past investments would pan out. The downside to this is having to monitor several accounts and you could lose track of some of them over time.
Start sending out job applications
You can start sending out job applications to minimize the amount of time you have to go on without a steady income. The closer you can pull that gap together, the better. You would not have to dip into your reserve funds that long and you get back into a routine. More importantly, a stable income starts to flow back into your household budget.
Look for a side hustle
One of the things you need to look into when you are looking at a job loss is taking on a side hustle. This can be in-between jobs you are taking on to pay the bills. You can even look at your hobbies and find a way to generate income from them. Maybe it is high time to start offering your services to family and friends for your skills. It might even pave the way for you in finding and fuelling your passion leading to a business opportunity.
If you know your way around programming and design, there are several freelancing gigs available that you can take up. You work around your own schedule and even pace. You can also start bringing your photography portfolio to local and national magazines and even advertising agencies. The idea is to market and get yourself out there.
An impending job loss is a scary thought and an even scarier reality once it happens. The idea is to prepare for it enough that you mitigate the effects it would have on your finances. As you try and find a new job or even work on your passion and skill, preparing for it can mean the difference between being in debt and being able to move forward in life.