Even in a strong economy, jobs are sometimes eliminated. It happens all the time for reasons that have nothing to do with performance. Should your position be discontinued, your first task is to keep calm and carry on. Then you'll be able to start taking some important steps to help keep your finances in order. Here are five financial considerations that may help when you lose your job.
1. Assess Your Overall Financial Position
Start by looking at your routine living expenses. It's easy over time — especially if your income has increased — to begin to think of luxuries as basic necessities. For instance, do you ever crank up the heat when a sweater could suffice? You may be able to trim your spending after scrutinizing your monthly patterns line by line.
Once you've determined what your bare-bones budget should look like, start adhering to it. Remember that after you're laid off, you may need to spend several weeks, or even months, on your streamlined budget before you're collecting a paycheck again.
2. Apply for Unemployment Benefits
As long as you were terminated for a reason that's not your fault, and you meet eligibility requirements, you may be able to receive unemployment benefits through the U.S. Department of Labor's Unemployment Insurance programs. Consider applying for those benefits promptly. They won't replace your entire paycheck, but they may help.
3. Secure Health Insurance Coverage
If you had health insurance through your former job, you may be eligible to continue to receive health benefits through COBRA continuation coverage, according to the Centers for Medicare and Medicaid Services. Your other options will likely depend on your household income. For instance, you may qualify for a Marketplace insurance plan or Medicaid. You can apply through the Marketplace to see what you're eligible for and then decide what the best coverage is for you.
4. Review Your Other Investment Accounts
If a portion of your rainy day fund is invested in securities, you might consider starting to sell some to give yourself the liquidity you'll need to cover living expenses until you're back at work. You'll want to keep in mind the tax implications, and potential fees, expenses and surrender charges, of selling investments, however.
For example, you might end up owing capital gains taxes by selling stocks that have increased in value. Selling certain stocks that have lost value might help you build up tax deductions to balance that out. Also, remember that if you sell stocks for a gain and you've held them less than a year, those profits will be taxed at your regular earned income tax rate, and not the lower long-term capital gains rate that's applicable to your tax bracket.
Consider taking a close look at each of your investments to determine whether you would benefit from selling some, or if it would better serve your overall financial plan to hold onto them until another time.
5. Consider a Phased Retirement
If you're close to retirement age, consider whether you could afford to begin a phased retirement as you look for your next job. You might have an easier time finding a part-time position than a full-time one. And if you decide that you'd rather return to a full-time job, you may be able to find one that's less pressure but helps provide a smaller paycheck, which is likely better than no paycheck at all.
If you're wondering what to do when you lose your job, keep in mind that your plan will largely depend upon your unique situation, such as your age and marital status. Whatever your circumstances, you have options to help keep yourself moving forward until you get back into the workforce.