Losing a job can be difficult and it can place an unexpected financial strain on you and your family. While you're looking for a new job, it's important to develop a strategy for dealing with your bills. If you have recently lost your job or you think there may be a layoff in your future, it's important to have a plan in place to prevent your financial situation from spiralling out of control.
Generating Income
The first priority following a job loss should be to establish a new source of income. Unless you were fired or quit voluntarily, you more than likely qualify to receive unemployment benefits. Unemployment guidelines and benefits vary from state to state; it's important to contact your local office as soon as you lose your job to begin your application. Family Education also recommends looking for alternative sources, including investment income and interest from savings accounts, and generating income from temporary or side jobs.
Establishing Assets
In addition to generating income, you should also consider what assets and resources are already available to you. These assets may include the equity value in your home, vehicles, life insurance policies, retirement accounts, savings accounts or personal belongings. For example, if you have funds in an Individual Retirement Account or an employer's 401(k), you may be able to withdraw or borrow against the money until your financial situation improves. ING Financial Services recommends consulting with a tax specialist before making withdrawals to determine whether you will have to pay any fees or penalties for doing so.
Prioritizing Expenses
Once you have established your income and assets, you need to look at your expenses to determine how to pay your bills. LSU AgCenter recommends sitting down with your family and going over all of your monthly expenses to determine what must be paid first and what can be eliminated, deferred or reduced. For example, you may consider contacting your mortgage company to negotiate a temporary payment plan. If you have a car loan, check with your lender to see if you can defer your payment for one month.
Managing Debt
If you have outstanding credit card debt, you need to develop a strategy for dealing with it that works best for your situation. Business Center North recommends contacting creditors immediately to advise them of your situation if you are unable to make your minimum payments. Some creditors, such as American Express, offer hardship programs which allow you to make lower payments or defer them altogether for a certain period of time. Avoid more debt by limiting your credit card use to only emergencies.
Asking for Help
If your financial situation is extreme, you can and should pursue whatever resources are available to you in the community. These resources may include food stamp programs, food banks, job search or employment placement services, government-sponsored housing or medical care, or other programs designed to aid families and children who may be experiencing financial difficulty. While you may feel uncomfortable asking for help, it's important to ensure that your family's basic needs are met until your situation improves.
References
- Family Education: Financial Strategy Planning After Job Loss
- LSU AgCenter: Strategies for Coping with Job Loss
- Business Center North: Financial Strategies and Steps to Take Following a Layoff
- ING Financial Services: Survival Strategies After You're Laid Off
- Smart About Money: Ease the Financial Trauma of Job Loss
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