What to do when you lose your job

March 27, 2020

A few key steps can help you feel more in control.

 

Losing your job without a new position lined up can be a scary scenario — even if you have measures in place to protect your finances. Regardless of your situation, you'll likely need to make some changes. Here are some steps to help ease the burden and take control of your finances after a job loss.

NOTE: If you receive a severance package from your former employer, be sure to review the details closely as it could affect steps listed below.

 

Consider unemployment benefits


If you lost your job through no personal fault (like a company-wide layoff), and you meet your state’s requirements, you may be eligible for unemployment benefits. The purpose of unemployment benefits is to partially replace lost wages, so if you’re eligible, you shouldn’t shy away from applying.

Many states offer online applications that could speed up processing and get you benefits faster. Required information can vary by state, but could include:

  • Social Security number
  • Driver’s license
  • Contact information, including your address
  • Previous employer information
  • Bank account information in states that offer direct deposits of benefits

 

Adjust your budget


While you look to replace your income, see where you can cut back on your budget. Review your expenses and adjust where you can to protect your savings. If you have an emergency fund, you might need to tap into it to help cover your regular expenses after losing your job.

If you're struggling with debt repayment, research if any federal, state or lender relief programs are available, including mortgage relief programs, credit card hardship plans or credit counseling.

 

Get back in the job market


If it’s been years since you searched for a job, this can feel intimidating. The first thing you should do is update your resume and LinkedIn profile. Then, if possible, reach out to your former employer, and ask how they would describe the reason for your departure, as that could come up in future interviews. You can also ask for a letter of recommendation, especially if you lost your job for reasons not related to performance.

Figure out how long you can reasonably take to search for a job, based on your savings and unemployment benefits, as well as your spouse or partner’s income, if you have one. This can help you assess how selective to be when evaluating new opportunities.

 

Manage previous retirement plans


Decide what to do with any employer-sponsored retirement plans associated with your former job. Generally speaking, you have four options for your old 401(k):

  • Leave your money in your former employer’s plan. Note that you may need a minimum account balance to leave a retirement plan in place with a previous employer.
  • Transfer your money into your new employer’s plan.
  • Cash out your earnings.
  • Roll your money into an outside individual retirement account (IRA), such as a robo-advisor platform.
     

There are pros and cons with each option, so you may want to consider talking with a financial professional to provide guidance on how to allocate assets in your account.

 

Keep up with health insurance


Fortunately, the loss of a job doesn’t always mean an immediate loss of health insurance coverage. The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires continuation coverage be offered to employees after termination for reasons other than misconduct or a reduction in the number of hours of employment.

COBRA coverage lasts either 18 or 36 months, depending on the qualifying event. Even if you qualify for COBRA coverage, you should consider all your available insurance options. You may be able to find more appropriate or affordable coverage options from another source, such as the Health Insurance Marketplace.

While losing your job can disrupt your daily rhythm, it doesn’t have to disrupt your finances. A proactive approach may lighten your stress and help you feel more in control of your future.

 

Your finances can change unexpectedly for many reasons. Learn how to build up your emergency fund, even on a tight budget.

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