10 Vital Financial Steps To Take After Losing Your Job
Losing your job is one of the most stressful things anyone can go through, particularly when it comes to coping with the sudden loss of income. It’s important to quickly take steps to minimize expenses and stabilize finances.
Below, 10 professionals from Forbes Finance Council offer advice on dealing with the money-related challenges that come with losing a job and offer tips to help job seekers keep their finances on track until they find a new position.
1. Plan ahead and save emergency funds now.
First, one should always be prepared and have money saved for any type of unforeseen occurrence. If you do lose your job, stay focused and remember that for every door that closes, another opens! - Ellio Nurieli, Macmoor Capital
2. Don’t let your emotions win.
During an emotional time, such as when we lose a job, we tend to make bad financial decisions that negatively affect us long-term. Talk with someone who will act in your best interests and whom you trust. Try to take a step back and allow the advice to sink in. Too often, the immediate emotional response is to pull all your 401(k) or IRA money out, when it’s the last option one would want to choose. - Cole Stoneman, IronBridge Wealth Counsel
3. Cut the fat.
Analyze your monthly expenses and compare them to the bare necessities. Do you really need that monthly subscription to the streaming music service, the shave club or the “whatever”? Some subscription services will let you put your membership on hold for up to six months without losing status. You could save a hundred dollars or more by eliminating these expenses each month. - Dana Schuman, The Pioneer Woman Mercantile
4. Check your eligibility for benefits.
Your first priority after losing your job is to check your eligibility for unemployment benefits. Following this, you should devise a new daily routine centered around job hunting during business hours. Then, cut your expenses immediately by canceling or pausing your “nice-to-haves,” such as cable TV, magazine subscriptions, housecleaning services and streaming platforms. - Tyler Gallagher, Regal Assets
5. Continue networking, and leverage social platforms.
The standard, run-of-the-mill, conservative advice here would be to cut back on nonessential expenses. While this is logical—and in no way am I saying one should ignore it—I think it is equally if not more important to focus on finding a new job and source of income. Stay positive, continue networking and utilize all social platforms to get a job. Expenses that can help should be essential. - Frans Wiwanto, Flywire
6. Seek payment flexibility.
One way to manage your finances is to look for ways to pay over time. Credit cards can help, but be sure to avoid creating a cycle of personal debt. In-store options help by offering flexible monthly payment plans. When you choose one, make sure that it approves people across the credit spectrum, with personalized rates, to take the stress out of these everyday purchases. - Arad Levertov, Sunbit, Inc.
7. Protect your taxable assets.
Apply for state unemployment as soon as possible, but be aware that it’s taxable income. The state can side with you even if the employer claims a reasonable cause. Also, be careful about how you use your retirement funds to temporarily cover living costs. You may have penalties if you take distributions out of a 401(k) and don’t return the funds or do a rollover within 60 days. Many 401(k) policies allow loans up to $50,000 that provide a better option. - Jackie Meyer, Meyer Tax, The Concierge CPA Coach
8. Focus on the future.
Too many Americans look to their employer-provided 401(k) or qualified assets to bridge the gap because of the unknown time it will take them to find a new career path. It’s important to look at other resources and not jeopardize long-term retirement goals and the assets devoted to those goals. Start now by establishing an emergency fund that is not subject to market fluctuations and is readily available. - Mike McGlothlin, Ash Brokerage
9. Act on benefits before the window closes.
When you lose a job, for whatever reason, do not take any of the associated benefits for granted. Most benefits have a window within which you may be able to leverage them beyond your employment. Once you pass those windows, you’re out of luck. Find out, for instance, how long you have to convert employer-sponsored life insurance and make a good decision about keeping or jettisoning the benefit. - Wm. Scott Page, LifeGuide Partners
10. Convert your retirement account.
Convert your retirement account into a Solo 401(k). A Solo 401(k) is an IRS-approved account for an entrepreneur who has no W2 employees. For those who want to start a business after leaving their 9-to-5 job, this can be a great way to fund your new business, because you can access money in your Solo 401(k) without paying penalties and taxes. - Daniel Blue, Quest Education