Smart Financial Choices after a Job Loss
You may not be able to control if or when your company closes a plant or lays off workers—but you can take steps to manage the financial impact of those events.
Act Quickly to Reduce Spending
With less money coming in, you should take immediate action to reduce spending wherever possible. Resist the temptation to buy on credit.
Assess Your Short-Term Situation
Figure out how much cash you have readily available or can get on short notice, how much you owe—mortgage, rent, credit cards, car loans—and the monthly payments associated with those and other debts. Establish how long you can make ends meet on the financial resources that you already have in hand.
Ask About Dislocated Worker Services
Your employer may work with state and local officials to provide services such as job placement, retraining or resume writing. Maximize your opportunity to get a new position as quickly as possible by taking advantage of these services— make finding a new job your full-time job. If you belong to a labor union, also ask your union what it can do to assist you.
Don’t Take Out Loans Against Your 401(k)
Loans put a drag on your retirement savings by reducing the amounts invested on your behalf. In the event of a layoff, 401(k) rules generally require that employees pay back loans within 90 days of leaving or face both income taxes and a hefty 10 percent penalty tax on the withdrawal.
Ask About Unemployment Insurance
The state’s unemployment insurance office may visit your workplace to offer guidance about the application process. Find out if you qualify and how the insurance may change if you get other payments from the company. Knowing the amount of the insurance benefit and the time you can expect to receive it will help you handle your finances. Remember that when you file for unemployment insurance, state regulations generally require that you also register with the state’s employment service so you can start searching for a job immediately. Check with your state to see whether any exceptions apply.
Whatever the reason for your job dislocation, you now face a period when handling your finances correctly will be critical to you and your family. These tips can help you take charge of your financial situation.
Download these tips (as well as more material) as a PDF guide.