Dear Money Mentor: I lost my job. What should I do first?

Seven tips to help you get through this period of temporary unemployment. 

Dear Money Mentor is designed to answer common consumer banking questions and offer guidance to improve financial wellbeing. Read on for tips and expert advice from Nancy Smock, branch manager, and Anthony Marengo, branch assistant manager.

 

In one way or another, everyone has been affected by COVID-19. In these uncertain times, many people are finding themselves in difficult and unexpected situations, including sudden unemployment. Focus on what you can control, remain positive, and remember that you have the same set of skills and work ethic as you did when you were employed. Use these seven financial tips to help guide you through this time.

 

1. Create a budget

If you don’t have a budget in place already, take this time to examine your monthly bills.

• First, separate the necessary expenses from the unnecessary expenses.
• Then, prioritize payments, such as your mortgage or rent, utilities, car loan and insurance.
  

 

2. Go through your employment package

When first hired, you likely received a stack of documents. Some probably outlined available resources in the event that you left the company, whether voluntarily or layoff. Refresh your memory by reviewing information on:

• Health insurance: Every company with more than 20 employees is required to offer COBRA coverage. COBRA coverage allows you to stay on your former employer’s health insurance plan for a period of time (usually 18 to 36 months). Note: you may be required to pay the full premium.
• Retirement account: If you have more than $5,000 in your 401(k) retirement account opened with your former employer, you don’t technically have to do anything. But that’s not ideal since your employer is no longer matching your contributions. Instead, rollover the amount into an IRA or a 401(k) with your next employer.

3. Use severance wisely

In some states, it’s required by law that companies pay laid-off employees’ wages through the termination date and for accrued, unused vacation time. But depending on the company and length of employment, you may be offered more in the form of severance pay. Some tips:

• Treat this money like a regular paycheck to pay bills and other necessary expenses.
• If you receive it in one lump sum, consider prepaying a couple months’ worth of bills for peace of mind. And if you get another job before the severance runs out, put it toward your financial goals.

 

4. Tap into your emergency fund

If you aren’t receiving severance pay or the money has run out, plucking from a savings account or emergency fund is completely acceptable. That’s the reason you have a savings account in the first place. Ideally, you should have six months’ worth of living expenses saved up. But don’t stress if that’s not realistic for you at this time. Once you are employed again, creating an emergency fund is a great financial goal to work toward.

 

5. Apply for unemployment

Research and apply for COVID-19 unemployment benefits. These can vary between states, so use this benefits finder to determine your options as you move forward.

• Do so right away, since it can take a couple of weeks or more to start receiving funds.
• Depending on the state you live in, severance pay could decrease the amount of unemployment you can receive. Or it can prevent you from collecting it altogether.

6. Borrow money

Asking for money from anyone, let alone a friend or family member, is difficult. However, if someone you’re close to can offer assistance, don’t be afraid to admit you need help.

If that isn’t an option, talk to your bank about securing a line of credit. It’s a set amount of money the bank makes available for you to borrow for a specified length of time that can last several years. Some benefits to having a line of credit:

• Compared to a loan or credit card, you aren’t charged any interest on the money until you draw from it.
• If you end up not using the line of credit, you won’t owe a penny. 

 

7. Keep creditors in the loop

Don’t hesitate to alert creditors of your unemployment situation.

• Creditors may be able to offer solutions if you can’t pay your bills.
• Student loans, for example, have the option of deferment, which allows you to temporarily stop making payments.
• Other creditors might permit you to skip a month’s payment in exchange for a small fee.

The key is to talk to creditors early, before you miss a payment. If you’ve been on-time with your previous payments, they will be more likely to grant you some leniency.

Learn more about how U.S. Bank is helping customers during COVID-19.