The average person changes jobs three or four times in their lifetime and in today's world, nobody is immune from sudden job loss. It's important that you are prepared for the possibility. Getting your finances in order will help you avoid going into unmanageable debt and you won't have to settle for the first job that comes along just to get by. Here are some ways to prepare for the possibility of unemployment:
Assess your financial situation before the need arises
Make a list of your current assets and debts and determine what your average monthly expenses are. Evaluating and understanding your current, personal balance sheet will enable you to prepare for a possible loss of income. It may be helpful to create a budget as well.
Know your job severance policy and other benefits
Acquaint yourself with your employer's severance policy now. Knowing how much you can expect if you're laid off helps you calculate how much you need to save or set aside in an emergency expense fund. You should also determine whether you'll be allowed to continue your health insurance benefits if you lose your job.
Create an emergency savings account. Saving some of your money separate from regular savings or checking accounts can help you cover any unforeseen costs that may arise due to the loss of your job. An emergency fund should be equal to six to eight months of expenses.
If you do lose your job
If you do find yourself unemployed, here are additional tips for getting through a period of job loss:
- Prioritize your financial obligations and use your severance pay to pay the most important things first: rent or mortgage, car payment, electricity, groceries, etc.
- Only use credit cards for critically important expenses.
- Contact your creditors. Inform them you've lost your job but are actively seeking employment. Discuss options for token or reduced payments for a limited time.
- Apply for Unemployment Insurance as soon as possible. Waiting may reduce your benefits.
- Be proactive with your job search. There are numerous career centers and online search tools to help you start a new chapter in your life. Additionally, networking with friends, relatives, and family has potential to lead to your next position.