Guest Author - Reshma Vyas
With the recent national unemployment rate surging to well over 8%, growing numbers of American workers are increasingly becoming the recipients of the dreaded “pink slip”. The loss of a job is always stressful. However, during recessionary times, the emotional and financial toll of unemployment can have a devastating effect on individuals and families as jobs become increasingly scarce. As the recession tightens its grip, the job search is taking far longer, often 12 months or more. In the event of a sudden job loss, there are prudent financial strategies we can employ that can help us emerge from this difficult crisis on a stronger footing.
To Do ASAP:
1. Depending on whether you lost your job through attrition, downsizing, merger or other factor beyond your personal control, try to negotiate the best possible severance package.
2. File for unemployment benefits as quickly as you can.
3. Maintain your health coverage. If you are covered by COBRA, try to hang onto the coverage for as long as possible (the maximum period is 18 months). COBRA coverage can be rather expensive and it may be worthwhile to allocate some time to exploring more affordable options. If you find yourself without any health coverage, contact health brokers in your area to obtain a plan that meets your budgets and needs. State health insurance carriers are one option. Compare health care plans from a wide variety of companies and carriers (i.e., Blue Cross and Blue Shield, Cigna, Aetna, United Health and Assurant Health) as well as from web resources such as ehealthinsurance.com or health-insurance-carriers.com. Professional organizations and associations may also offer health care coverage to members.
4. Maintain a good relationship with your employer. Explore any part-time employment opportunities that might be available with the company. Companies that are in the midst of restructuring or mass layoffs may offer assistance to employees. Take advantage of any and all networking and support services that your employer offers.
5. Start your job search immediately. Be aggressive in networking. Do not procrastinate. As the ranks of the unemployed grow, obtaining even a relatively low wage part-time position is proving to be a major undertaking. Explore adult training programs offered by state agencies and job corps centers. One helpful resource is Servicelocator.org.
6. Maintain your emotional and physical well being. Get into the habit of going out of the house everyday for a period of time. Go for long walks; enjoy the fresh air and nature. Make a strenuous effort to continue daily routines and hobbies. Take solace in your friends and family. Don’t give up on yourself. Looking and feeling your best is absolutely vital!
1. Review your household expenses. Clearly separate “needs” from “wants”. Scale back your budget drastically. If necessary, eliminate cable television, cell phones, all entertainment and recreational expenses. It’s amazing and inspirational what we can learn to live without when we are forced to by sheer circumstance. When you go grocery shopping, avoid buying junk food, convenience foods and prepared meals. Never go shopping without coupons, a calculator and your price book. Buy in bulk whenever you can. Focus on savings and stockpiling staples. Get acquainted with food co-ops, food banks and farmers' markets in your area.
2. Create a temporary “emergency” budget. This is the budget you will rely on to control spending and saving. All the expenses in your budget should be only those that are required for daily living.
3. Prioritize your bills. Now is not the time to sink further into debt and ruin your credit score. If you are unable to pay your credit card bills and other household bills, make at least the minimum payments. Contact credit card and utility companies to see what possible options they may provide.
4. Meet only your regular mortgage obligations. Refrain from making additional payments and save the money instead.
5. Review life, home and auto insurance contracts. Consult with your insurance agent or broker to find out if you can reduce these payments or negotiate more favorable terms.
6. Consider downsizing. Go through the contents of your house and a make an inventory of items that you no longer you use or want to sell. Hold a garage or yard sale. If necessary, sell personal luxury items such as your boat, RV or motorcycle.
7. Pay only cash when you go shopping.
8. Evaluate your savings accounts and emergency cash funds. Do you have enough in the way of savings that can see you through the next 3-6 months without a paycheck?
9. Shop only when necessary. Avoid malls, shopping plazas and retail outlets.
10. Put a temporary halt to making financial contributions to personal investments such as mutual funds. Let the dividends and capital gains be reinvested in your mutual funds. Conserving cash should be your primary goal.
Don’t – Mistakes to Avoid!
1. Don’t tap into retirement accounts such as a 401(k) or IRA to meet daily living expenses, rent or mortgage obligations or pare down debt.
2. Avoid tapping into home equity in order to generate income.
3. Make it a point to never use your credit card.
Resources Of Interest: