Learning you’re going to lose your job can be a major blow; one that can trigger a tidal wave of financial anxiety. However, this is an event that happens to many Americans for one reason or another, and it’s not always their fault.
Case in point: Few predicted the trajectory of the coronavirus and the impact it would have on not only the health of Americans, but the employment status. As one expert predicts for the New York Times, the jobless rate for March 2020 may have reached approximately 13 percent — the highest level of unemployment since the Great Depression.
Dealing with unexpected job loss is never easy, but there are a few actions you can take to tide yourself over until your next paycheck.
Here are four financial tips for Americans in such a situation.
File for Unemployment
If you lose your income through no fault of your own, you’re likely eligible for unemployment insurance. You’ll typically need to file a claim in the state you worked within a certain time frame after losing your job.
You can expect it to take at least a few weeks to receive your first benefit check, which will represent a certain percentage of your former income. State requirements vary, so your first stop should be a visit to your state’s employment insurance website for more details.
Streamline Your Budget
Next, it’s time to adjust your budget accordingly. Use this opportunity to tighten up your budget, too — looking for any opportunities to reduce spending on non-essentials.
Prioritize your bills in order of importance during this time. Keeping a roof over your head is your first priority, followed by utilities and auto payments. By canceling all non-critical memberships, subscriptions and recurring charges, you may be able to stay on track with essential bills, health insurance and non-negotiable living expenses.
Speak with a Credit Counselor
You may still find yourself falling behind on bills in the wake of a layoff. If this is already the case, or you’re headed this way in the near future, make an appointment with a credit counselor to review your financial situation. These trained professionals can make recommendations, offer educational resources and get you enrolled in a debt management plan if it’s deemed advisable.
As many debt settlement enrollees have noted in their Freedom Debt Relief reviews, losing a job — or having a spouse lose their income — was a hardship that spurred them to pursue debt settlement after they fell behind on monthly payments. This strategy involves saving a certain amount of funds, then negotiating with creditors to settle for a percentage of certain specific types of balances you owe.
A proactive approach to handling debts after a job loss can help you avoid foreclosure and/or filing for bankruptcy protection.
Adjust Your Savings & Retirement Plan
While you may have been saving a certain percentage of each paycheck at full income, you’ll likely need to redirect those funds to cover living expenses.
The same principle applies for your retirement plan. However, it’s inadvisable to cash out your retirement plan, except as an absolute last resort. You could have to pay income taxes and a penalty on those funds. A better strategy is temporarily pausing contributions until your income starts up again. If you were putting money into a 401(k) through your employer, you can open an individual retirement account and roll those funds over — or wait and transfer those funds to a new employer’s 401(k) in the future.
Losing your job unexpectedly is tough, but there are certain actions you can take to lessen the impact and stay afloat until you’ve lined up another job.