Finances: What to do?

“Money isn't the most important thing in life, but it's reasonably close to oxygen on the "gotta have it" scale.” -- Zig Ziglar

This one’s hard, but bad news does not get better with time. It’s MUCH better to face the financial side of your job loss head-on, right away. A 50-year study by Gallup about wellbeing found that the difference between thriving and just surviving is not how BIG your bank account it, but how IN CONTROL you feel over your finances. In other words, if you know what the real situation is, you will sleep better at night. Figure it out, then make a plan to deal with it.

Here are some things you can do right now to get your finances in order:

  • Figure out your WANTS versus your NEEDS. Write them down. Talk to your family about it.
  • Find out if you are going to get severance payments … and for how long. If you are, make sure you understand whether or not you can take unemployment insurance at the same time you are receiving severance checks (policies vary by state and by company).
  • Sign up for unemployment benefits. Knowing how much you qualify for in unemployment insurance will help you plan for how quickly you will need to get a job. Start asking about these now, so you can tap into them right away. Every state has its own requirements to qualify, length of time you will receive benefits, and benefit amounts.
  • Find new health insurance. Ask if you can continue your health insurance plan. If you can’t, find a solution. You really can’t afford to go without health insurance. Even if you must get a catastrophic plan (high deductible), do it.
  • Create a budget. I know! I know! You do NOT want to think about this, but you must. You can do it! There are tons of budgeting apps out there (many of them are free and easy to use). Mint is one popular example. If you don’t trust sharing your confidential financial information with other people, a good old-fashioned spreadsheet will do, too. The questions you need to ask are quite simple: What’s coming in (income)? What’s going out (bills)? Where can you cut expenses now? If you don’t have an emergency fund (6-12 months of savings you can tap), then this would be a great time to get financial advice from someone who knows what they’re talking about. If you need to cash out some retirement funds, make sure you get professional advice before you do. Once again, there are taxes and penalties you will incur if you do it the wrong way. Once your budget is laid out, it will be MUCH easier to see where you can make cuts now without a lot of discomforts.
  • Trim down your expenses. Start cooking at home. Wait to buy that new car. Skip that fancy hotel this time around. When is the last time you really looked at where you spend your money? Something as small as a daily run to a coffee shop ($5-$10 per day) can really add up.
  • Negotiate with your creditors. Many creditors will let you pay less money per month while you are unemployed, but you must ask … and you must get it in writing. Big companies have a department for this! It’s often called a “hardship department.” Ask what their procedure is. Sometimes, you will need a hardship letter, or to produce a budget. If they approve a reduced payment plan, get it in writing and get their commitment NOT to report you to the credit bureaus as late with your payments (most companies will agree to this). The earlier you contact your creditors to discuss, the more likely they are to work with you down the road if you find yourself struggling to pay your bills. Even if you are an on-time bill payer and have money in the bank, contact them anyway. They might reduce your interest rate or monthly payments.
  • Life insurance. Ask if you can get a continuance on your life insurance. Most people lose their life insurance when they lose their job. If that’s the case for you, can you afford to go without? If not, how much can you afford to purchase on your own? Figure it out. Nobody likes to think about this, but if you have people counting on your income, do everything you can to get some life insurance for yourself.
  • Retirement funds. Can you leave your pension & retirement funds without penalty? If you leave them, make sure your former employer is not going to automatically cash them out and send you a check. That might cause you to incur penalties and taxes you don’t have to incur.
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