Few experiences are as traumatic as losing a job. When your boss calls you into the office and gives you the bad news, your first thoughts may be those of panic. How will you pay your bills and keep up the mortgage payments? What will you tell the kids? How can you face your spouse? All these questions are running through your head as your supervisor tells you how sorry they are.
Now that the initial shock has worn off, it is time for some serious planning. Losing a job is tough, especially when the bad news comes out of the blue, but what you do next could make all the difference to your financial life. Here are some essential next steps to take in the wake of a sudden job loss.
Build a New Budget Based on Your New Reality
Having a budget in place is the basis of any sound financial plan, but that spending plan is only as good as its assumptions. When you built your budget, you based it on a certain amount of income, and that money came mostly from your job.
Now that the job, and the income, are gone, it is time to build a better budget, one based on your harsh new realities. Making your spending plan work in the absence of a full-time income will likely involve many tradeoffs, including cutting off the cable for the time being, eliminating streaming subscriptions and avoiding takeout and restaurant meals for the time being.
Contact Your Creditors
It is tempting to hide from your creditors when you lose your job, but that is a very bad idea. Being honest about your sudden joblessness with your mortgage lender, credit card providers and other creditors is essential if you plan to weather the financial storm and come out whole on the other end.
Many creditors have programs in place designed to make life easier for the suddenly unemployed. From lower interest rates to temporary moratoriums on payments, these programs can be a lifeline for the newly unemployed, but they are not entirely altruistic in nature. Creditors have a vested interest in helping their customers avoid bankruptcy, and they may respond with surprising compassion and flexibility.
Review Your Emergency Savings
Hopefully you have been putting money aside for a rainy day, and now the storm is here. If you have an emergency fund in place, now is the time to review those savings.
Now that you have adjusted your budget for the new reality you find yourself in, you can do some quick calculations. If your emergency savings are not stretching as far as you would like, you may need to slash your spending even more until you find new employment and the financial storm has passed.
Get in Line for Unemployment
Navigating the unemployment compensation system can be a daunting task, especially if you have never done it before. All those rules and regulations, the mountains of paperwork and the complicated online forms can be difficult to deal with, and that is why it is so important to start early.
In many states, applicants for new unemployment benefits are required to wait a week before getting their first check, and that could make an already difficult budgetary situation even worse. By getting an early start on the unemployment compensation process, you can minimize the financial impact of your sudden joblessness.
Explore Gig Work and Other Short-Term Career Options
When you are unemployed, the ultimate goal is to get another job, but what if those in your industry simply are not hiring? If you have explored all the usual options and come up empty, it may be time to get creative.
Gig work and other short-term employment may not be glamorous or family sustaining, but it can help you bridge the gap until something better comes along. You will need to review the unemployment rules in your state to see what kind of impact this short-term employment will have, so you can maximize your earnings without putting your benefits in jeopardy.