Losing a job can be one of the most challenging experiences you’ll ever face. Most people live paycheck to paycheck, relying on income from a consistent salary. Unfortunately, Covid-19 decimated the job market. As some businesses downscaled and others closed completely, the unemployment rate rose to 15% in 2020.
Even though the unemployment rate has improved since then, job losses are still prevalent, and it’s vital to understand how to mitigate the negative effects if it happens to you. Fortunately, there are several ways to handle financial setbacks. Let’s look at five of them.
1. Balance Your Books
When you lose your job and income, you first need to consider your current financial situation. First, calculate all household income, including your partner’s earnings, interest from investments, and any other monetary sources.
Then, list all your expenses. It is important to differentiate between the essential expenses – such as your mortgage, education, food, and transport – and the non-essentials – such as store cards, credit cards, and club memberships. Once you’ve determined your budget, you’ll be able to assess how to manage your finances until you find a new job.
2. Investigate Unemployment Benefit Options
Your second task after losing a job is to check on the benefits and relief options available in your particular state. Although unemployment benefits and relief options were available before Covid-19, special grants and plans have been put in place to help specifically with Covid-19-related job losses. So you may now be eligible for relief even if you wouldn’t have been before the pandemic.
Several factors will determine your eligibility to receive benefits, including your previous salary, your household’s financial stability, and your state of residence. The USA Gov website has all the information you need to find out more and get the help you need during this difficult time.
3. Seek Debt Relief
One of the biggest concerns associated with job loss is the inability to pay off debt. Potentially, all those agreements could be in jeopardy when you lose your income, from mortgages and vehicle finance to store credit and credit cards.
The good news is that credit providers and lenders make provisions for these situations. So to take advantage of those provisions, contact your lenders and credit providers and communicate your employment status as soon as possible. They’ll be able to offer various solutions, including a payment holiday, interest-free payments, and other debt-relief options to assist you temporarily.
4. Avoid Using Your Retirement Funds
It may be tempting – and, in some cases, necessary – but you should avoid raiding your retirement funds if at all possible. For example, if you have a 401(k) account with the company job you just lost, don’t plunder it unless you don’t have any other option. Instead, keep it intact, and before you know it, you’ll be building it again with income from your new job.
If you have a personal retirement savings policy, the same rule applies: keep your hands off and only dip into it as a last resort. If dipping into retirement savings is your only option, do so cautiously and with the advice of a financial professional.
5. Get Back Into the Job Market
Once the shock is over and you’ve organized the necessary provisions to keep things running, your next step is finding a new job. So get your CV together, spruce up that portfolio, and find an agent or employment specialist who can get you back into the job market as soon as possible.
Losing your job might seem like the end of the world. But if you remain calm and collected and follow the proper steps, you’ll be just fine, and hopefully, on your way to an even better opportunity.