Never in the history of the United States have so many people been unemployed as right now, due to the shutdown of the economy. Unless you live in a neighborhood of rainbows and unicorns, it’s a good bet that either your family or someone you know has lost their job.
It’s important to know what to do when the ax falls, whether it’s expected or not. Even when you’re expecting it, you will be reeling in shock.
Well, I’ve got some tough love for you here: Get ahold of yourself! The first steps you take can help you to survive until you get a new source of income.
Here are the steps to minimizing the damage to your personal finances when a sudden job loss occurs.
1) Don’t sign anything right away.
As much loyalty as you may have had to your company, they clearly don’t feel the same sense of loyalty towards you. They’re trying to survive right now too. Many companies will try to get you to sign paperwork right away to “settle the details.” Trust me when I say, these details will be skewed in their favor, and not yours.
You do NOT have to sign anything while sitting there, stunned at your sudden change in circumstances. It’s vital that you take the time to read over everything carefully. Your severance package, your 401K, any accrued pension, and unemployment benefits will be at risk. In some cases, you can negotiate this, even though you are not sitting in the power seat.
Don’t commit to any type of agreement while you’re in shock, particularly if they try to coerce you into signing immediately. Regardless of what you may be told, any delay in your unemployment benefits or severance will be minimal.
2) Begin a total spending freeze for a couple of days.
One of the biggest mistakes people make when faced with a shocking job loss is to go on spending as though they still have an income. Perhaps they go and buy something to try and make themselves feel better. Maybe they just continue spending like they always did, with hundreds of dollars going out for kids’ activities, dinners out, and shopping trips.
You need a few days to re-assess your budget and see where you’re at. You don’t want to regret the expenditures you make right after a job loss. Put yourself on a complete spending freeze for the next few days while you assess the change in your financial situation.
3) Apply for unemployment benefits.
Unemployment is not welfare. It is something that you have been paying into the entire time you were employed. Please don’t feel guilty about taking the money that is rightfully yours.
Keep in mind that it can take up to two months for your benefits to start, and that money from your severance package can delay the onset of benefits. Unemployment is only a portion of what you made when you were employed, so a revamp of the budget is a must.
Make your application immediately so that you know where you stand and when you can expect the money to start coming in. Hopefully, you will have found another job by then, but jobs aren’t always easy to come by these days.
4) Create a budget for necessities.
It’s absolutely vital that you drop your expenditures to the bare minimum until you are able to get another stream of income. You need to take a look at where your money goes and base your new budget on the necessities. Although having a vehicle in each stall of the garage and an iPhone in the hand of every family member is nice, these are not necessary to sustaining life.
- Food (and the ability to cook it)
- Medicine and medical supplies
- Basic hygiene supplies
- Shelter (including sanitation, lights, heat)
- Simple tools
- Defense Items
Absolutely everything above those basic necessities is a luxury.
So, by this definition, what luxuries do you have?
5) Slash luxury spending.
Reduce your monthly payments by cutting frivolous expenses. Look at every single monthly payment that comes out of your bank account and slash relentlessly. Consider cutting the following:
- Cell phones
- Home phones
- Gym memberships
- Restaurant meals
- Unnecessary driving
- Entertainment such as trips to the movies, the skating rink, or the mall
This isn’t forever. It’s just until you have a reliable source of income again.
6.) Start looking for new streams of income.
You know those people who tell you that it’s easy to find a new job if you wouldn’t be such a snob? Ignore them. The job market of today is not the job market of a decade ago. Jobs are few and far between, and good jobs are as elusive as unicorns in Central Park.
You may need to look at creating your own streams of income, like:
- Create an online business
- Using your expertise from your former job to work as a consultant
- Doing various small jobs
- Create a home-based business with a low start-up cost (Now’s not the time to make a large investment)
- Use creative skills to make things to sell
- Provide a service. Maybe you can cook, sew, repair things, or build things. Lots of people can’t and will be willing to pay someone who can
When I coach people who want to start a blog, the first thing we talk about when it gets to monetization is that you must have multiple streams of income. Really, it is the same for everyone. If you lose one stream of income, it’s best to have other streams to fall back on. Diversifying your income is one of the best financial preps you can make.
7) Sell stuff.
All that stuff you’ve been meaning to go through in the basement just might be the key to keeping a roof over your head. It’s time to start an eBay account, have a yard sale, or get on Craigslist and start selling things that have just been sitting there for a while.
Your trash might be another person’s treasure. Instead of regifting those things in your attic, sell them so they can become someone else’s clutter. You’d be surprised how much money you can make while decluttering your home.
8) Look for the silver lining.
Although job loss can be terrifying, it can also be the start of something wonderful.
When I lost my job in the automotive industry, I was devastated. As a single mom, how was I going to continue taking care of my two girls with no income? Instead of being a bad thing, it turned out to be the best thing that ever happened to me and many other people say the same thing.
I was able to take the writing I’d been dabbling in for years from a hobby to a full-time job. I made a conscious decision NOT to search for another job, but to follow my dream of being a writer and editor. Maybe I succeeded because it was do-or-die time. There was no option but to make it work. I began writing for other websites, started my own site, and began outlining books.
As it turned out, that shocking, unceremonious discussion in the manager’s office was the moment my life changed for the better. I’ve read many success stories that began the same way.
When you’re boxing up all the things on your desk and people are staring, it’s a horrible feeling. When you do that final walk of shame out the door, it’s humiliating. But those moments aside, this might be the push you need to make your life better.
Sometimes what seems like an ending can actually be a new beginning.
What has been your experience?
Have you ever lost your job? How long did it take to find a new one? Did it turn out to be a positive thing, or did it cause financial problems from which you could not easily recover? Share your experiences and advice in the comments below.