Financial Steps to Take Immediately After a Job Loss
What you'll learn: What to do financially after losing a job
EXPECTED READ TIME:4 MINUTES
March 26, 2021
by Tracy Scott
Losing your job is emotionally and financially painful. You may be left questioning your next steps and how you're going to pay your bills. While it's normal to feel anger, anxiety, and confusion, sitting with those emotions too long can delay recovery. The quicker you act, the sooner you can financially heal from the unexpected blow.
Here are nine financial actions to consider taking if you're met with a sudden job loss.
- Ask about supplemental income and benefits
- File for unemployment benefits
- Reassess your finances
- Maintain insurance coverage
- File eligible insurance claims
- Call your creditors and service providers
- Protect your credit
- Uncover alternate sources of income
- Seek new employment opportunities
9 Steps to Take After Losing a Job
Losing a job is difficult, but it's important to remember there are ways to endure financially. Start by taking the following steps.
Ask About Supplemental Income and Benefits
A job loss doesn't have to mean a complete loss of income. Speak with your human resources department about a severance package. Your former employer might offer several months' pay and extended health coverage for a limited period.
Other post-employment benefits could even help you find another job. In fact, some states offer free skills retraining and resume writing workshops for laid-off employees.
File for Unemployment Benefits
If your employment ended through no fault of your own, you may be able to collect state unemployment benefits. You may also qualify for benefits if you left your job for COVID-19 related concerns.
Unemployment benefits are temporary and won't replace 100% of your lost income, but they can help you pay the bills while you search for another job.
Apply for benefits as soon as possible, since approval can take several weeks. The application process varies by state. For details, visit the official unemployment benefits website of the state in which you worked.
Be sure to also know how unemployment income affects your taxes.
Reassess Your Finances
Pause your discretionary spending. Review your budget and be prepared to cancel optional services and place financial goals on hold. Put any income you receive toward budget necessities such as housing, utilities, and food. If you have anything left over, put it into savings for now.
Maintain Insurance Coverage
If you participated in your employer's health insurance plan, explore alternatives to continue coverage. You may have health coverage for a few more weeks, depending on when the last payment was made on your plan. But don't wait until your coverage expires to determine whether your budget can support Continuation of Health Coverage (COBRA). Keep in mind that COBRA, which may be available through your current health insurance plan, is often more expensive than government-offered options for health insurance.
If you cannot be added to someone else's insurance plan (a spouse or partner, for example), or if you are the one who provides coverage for your family, add the cost of health insurance to your budget. Forgoing health insurance could cost you thousands if medical services are needed.
File Eligible Insurance Claims
If you have job loss insurance, now is the time to file a claim. It can temporarily provide income that can close the gap between your prior earnings and state unemployment compensation. Some policies even pay off your mortgage in the event of a layoff.
Call Your Creditors and Service Providers
Many lenders, credit card companies, and service providers have financial hardship programs designed to help customers who need temporary payment relief. If you qualify, you may be able to reduce your payments or place them on hold for several months. This could free up cash in your budget to pay for other necessities and reduce stress while you pursue alternate sources of income.
Don't wait until you miss a payment or receive a collection letter to discuss your situation with a company representative. Lack of communication can harm your credit health — or result in termination of service.
Protect Your Credit
If credit payments are overwhelming even after you've eliminated discretionary spending and talked with your creditors, consider contacting a debt consolidation service for assistance. Reputable financial counseling agencies work with creditors on your behalf to negotiate lower monthly payments.
While many of these companies are not-for-profit, expect to pay a fee for their services. Search for a government-approved credit counseling agency by visiting the U.S. Department of Justice website.
Some financial institutions may also offer debt protection programs to help you out.
Uncover Alternate Sources of Income
While you're searching for full-time employment, supplement your income with temporary, contract, or part-time work. Before accepting a position, check with your state's unemployment office since additional earnings could affect your unemployment benefits.
Seek New Employment Opportunities
Be prepared to search both online and offline for work. Your friends, neighbors, and acquaintances are all potential sources of job leads.
The longer you're without a job, the more likely it is to feel defeated. But take heart. You might be only one job application or resume away from a better opportunity.
How to Prepare for the Future
Whether it's job loss, home damage, or a medical emergency, disaster strikes when you least expect it. That's why an emergency fund is absolutely critical. Emergency savings can get you through several months after a sudden loss of income.
Dealing with a job loss isn't easy, and the financial stress can intensify the longer you remain unemployed. But it's possible to ease that stress and shorten the time between your last job and your next one when you have a plan.
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