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Lost Your Job? Partial Furlough? The First Financial Steps to Take Thumbnail

Lost Your Job? Partial Furlough? The First Financial Steps to Take

Losing your job can be a devastating turn of events. Regardless of whether you had some time to prepare or the news blindsided you, you may feel anxious, or even panicked, about your finances.

In a perfect world, everyone would have a rainy-day fund with at least 3-6 months of living expenses saved up for emergencies. This would cover housing, food, healthcare, and other personal expenses for a time while you look for a new job. However, in the current economic climate, living paycheck-to-paycheck can feel like the norm. Feeling overwhelmed is entirely normal, but there are a few things you can do financially to improve your situation after a job loss. Here are some steps to help ease your mind and get you through this trying time.

Step 1: Figure Out State Unemployment Compensation

You may be eligible for unemployment compensation even if you’ve had only a partial reduction of income. You will need to fill out the proper forms, and you’re likely to get the fastest response by doing so online. Remember, during times of natural disaster, unemployment compensation may take longer to process than usual, and you won't receive payments as quickly. Keep in mind the benefits are temporary—finding a new job may take longer than you intend, and that your unemployment compensation may not last that long.

Step 2: Determine Your Bare Minimum Budget

Your bare minimum budget is the amount you need to pay all your truly necessary expenses. This includes rent or mortgage payments, food, utilities, insurance, healthcare, transportation, and debt payments. List these out so you can see them on paper with each expense listed and the monthly total.

Step 3: Eliminate Unnecessary Spending

Cutting back on any unnecessary spending will help stretch your money to cover your essential bills. This means as much reduction as you can for things like ordering take-out from restaurants, non-essential shopping, and other “retail therapy.” Remember that some expenses fall in between needs and wants and can still be reduced. (Some people consider their entire grocery bill as a need, forgetting that while food is a need, steak, for example, is not.)

If you have a family, now is the time to have a serious discussion with everyone in the household about reducing spending for the moment and the lifestyle adjustments you'll need to make.

Step 4: Contact Your Creditors

Prioritizing your debt payments when you lose your job is crucial. If you know you won't be able to pay all your debts on time, contact the affected creditors immediately. Let them know what happened and when you intend to pay on time again. Keeping creditors up to date about your circumstances may prevent them from sending your overdue bills to collection agencies.

If you have always paid on time before, lenders are likely to be more willing to work with you in this emergency. You may be a candidate for a hardship payment plan your creditor may offer; these are sometimes not announced, so ask if one is available. Don't let the bills stack up unpaid before you research all your options.

Most importantly, keep looking for work. Jobs may be hard to come by currently, but applying for the positions that are available will help refine your job search process and give you time to polish your resume. And remember, a lot of job hunting is a numbers game. It can be demoralizing to submit one application after another, but your odds of finding a job increase the more positions you apply for.

This content is developed from sources believed to be providing accurate information and is provided at least in part by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Original content of Practical Financial Planning, Inc. only is copyright © 2020 by Practical Financial Planning, Inc.