Lost your job? Follow these 7 steps now to protect your finances

What’s up

With the economy slowing, companies have started to lay off workers, and some economists say the trend is likely to accelerate in the coming months.

why does it matter

An unexpected job loss can be an extreme financial and emotional shock for you and your family.

What is the next

Protecting your finances after a layoff requires being vigilant, proactive and taking certain timely steps.

incessant inflationhigher interest rate and slowing consumer demand have led many experts to warn of a next recession. While the low unemployment rate of 3.6% still hints at the potential to avert this recession, there are also signs that the job market may be falling.

In June, notable companies, including Netflixcryptocurrency trading platform Coinbase and real estate companies Redfin and Compass laid off hundreds of employees each. Layoffs.fyi, a website that tracks downsizing in tech startups, saw about 37,000 layoffs in the second quarter, more than triple the same period last year.

As economic challenges deepen, more job losses are likely on the horizon. “We’re going to see layoffs increase more significantly and on a much broader scale than we’ve seen so far,” Guy Berger, LinkedIn’s chief economist, said in an email. “We’re going to see a lot of companies in a wide range of industries letting people go.”

To suddenly know that your position has been terminated is not only financially frightening, it is emotionally devastating. When I lost my role as a financial correspondent in 2009 during the Great Recession in a company-wide layoff, I first went through a shock stage and then questioned my self-esteem. And while help is available, I’ve learned that the only way to ease the pain of losing a job and ensure future financial well-being is to personally take critical steps to move forward.

Here’s some advice to protect your finances and land on your feet after a layoff.

1. Understand the fine print of your termination

If you were a full-time employee, you may receive a severance package that includes continued pay for a period of time. While employers are not legally required to offer ongoing compensation, termination can help minimize hard feelings and avoid lawsuits in the future. According to the Society for Human Resource Management, average severance pay equals one to two weeks of your salary for each year of service. So if you’ve had a two-year run, you can get up to four weeks of pay.

Before signing a termination agreement, make sure you have all questions answered by your human resources department. You can also negotiate more benefits, such as extended healthcare or access to job placement services. But don’t take too long: Termination agreements must usually be signed within 21 or 45 days, depending on your age and whether your position ended in a group layoff.

Avoid signing any waivers without fully understanding the terms or consulting an employment attorney, especially if you have experienced discrimination in the workplace.

2. Apply for unemployment benefits immediately

As layoffs increase, states may have a harder time processing jobless claims in a timely manner. You must apply for unemployment insurance in the state you worked in, and the sooner you apply, the better. While each state has its own eligibility requirements, you can usually apply if your job ended through no fault of your own. The Department of Labor has a list of all state application websites. It usually takes two to three weeks after you submit an application to receive benefits.

3. Health insurance insurance

If you received health insurance through your previous employer, it’s easy to assume that you can’t pay for it yourself. While it can be expensive, it’s critical to prioritize this in your budget if you have an emergency or need an expensive medical procedure between jobs. One in four Americans say they struggle to pay medical expenses, and several studies cite medical debt as a leading cause of bankruptcy.

You can continue to receive the same coverage through a federal program known as COBRA for up to 18 months. While this option may be convenient, it is expensive because you will be covering your share as well as your previous employer’s contribution. There is usually a 2% administration fee as well. Employers must provide laid-off workers with a COBRA election form within 30 days, and you will have an additional 60 days to apply. Coverage starts on your last working day or the day after your employer-sponsored benefits end.

It may be cheaper to be added to a partner’s group health insurance plan. It is also worth reviewing insurance plans on the Health Insurance Marketplace. While the open enrollment period is usually in the fall, if you lose your job at any time and expect to lose coverage within 60 days, you may be eligible for a “special enrollment period” due to job loss.

Finally, if you are a member of a trade union or professional organization, or if you take part-time courses at a local college, you may have access to more affordable group health insurance through these networks.

See More information: How to get health insurance if you lose your job

4. Examine non-fixed expenses

Losing your job immediately puts your variable expenses in a new light. Do you need that monthly subscription or streaming service? Can you save $50 on your monthly food and drugstore purchases by buying generics? When you’re unemployed, more money in the bank means less stress.

Cutting those expenses only takes a few minutes. After I lost my job in 2009, I contacted several client retention offices, including my gym and cable company, and negotiated discounts or temporary freezing of accounts. I managed to save a few hundred dollars a month from these short phone calls.

While you’re at it, call your creditors. If you think you’re going to have a hard time paying your monthly credit card bill or other debt, it’s best to be proactive now and ask for alternative payment options while your account is still in good standing. During the pandemic, the Consumer Finance Protection Bureau has encouraged banks and credit card companies to work with customers affected by COVID-19 and provide financial support, including reduced interest rates and loan extensions. These assistance programs may continue to be available, and individual lenders may even offer their own unemployment protection programs.

If you need more advocacy, contact a non-profit credit counseling agency such as the National Foundation for Credit Counseling.

5. Secure your retirement account

A layoff can also mean losing the ability to contribute to your workplace retirement account, such as a 401(k) or 403(b). You won’t lose the money, but you will need to make some decisions to protect your savings. When transitioning, it is critical to understand your options, follow instructions, and respect certain deadlines.

You normally have three options. The first is to withdraw the account. This option may be more attractive if money is tight after a layoff, but it comes at a price: withdrawing your savings before age 59 and a half can result in a 10% penalty. You will also need to pay taxes on the earnings.

The second option is to keep your retirement savings intact until you decide to transfer the funds elsewhere, such as your new job’s 401(k) plan. However, if the account total is less than $5,000, it can be closed after a few months and your employers will send you a check for the amount. This, again, can trigger taxes and early withdrawal fees.

The third option is to transfer your savings to your new employer’s plan or a individual retirement account. This can give you more control over the account and the ability to continue contributing. If your account is under $5,000 and you don’t want to risk being “withdrawn”, this move might be for the best.

See More information: Lost your job? Here’s What to Do With Your 401(k)

6. Keep the door open with a previous employer

After a layoff, it is normal to harbor resentment or other bad feelings towards your previous employer. But it might be wise to keep the door open and keep yourself in good shape. Stephanie Nadi Olson, founder of We Are Rosie, a freelance marketing specialist placement company, has seen a number of employers rehire employees laid off during the pandemic on contract or part-time basis. “Some companies were choosing to say, ‘Hey, we hate having to make this decision. We want to keep you in our work ecosystem.’ So they keep tapping into that talent,” Olson said on my podcast in June. If a layoff inspires you to transition to consulting work or more flexible hours, returning to your previous employer on a contract basis could be a possibility.

7. Do you work in a struggling industry? Consider applying your skills elsewhere

Companies in sectors that have benefited from spending booms caused by the pandemic, such as technology, cryptocurrencies, e-commerce and real estate, are in a period of cooling and leading the layoffs. If you work in any of these industries, remember that your skills and experience can transfer to other types of businesses, such as customer service, sales, marketing, engineering, or project management. Just because you’ve spent your career working in the tech industry, for example, doesn’t mean you’re limited to working in that field forever. At the end of the day, if you have a proven track record of problem solving, effective communication, and driving results, these skills can transfer to a multitude of positions.

Consider extending your job search to new industries that need new hires. According to a June report from the US Chamber of Commerce, some of the sectors with the highest rate of job openings include hospitality, food services, education, healthcare, and wholesale and retail trade.

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