Last Updated on:

May 24, 2021

How to Prepare Financially for a Job Loss

Approximately 60% of individuals in the workforce will be laid off at some point in their careers. If you are one of the unfortunate few to experience a job loss, you could be facing some tough financial times. 

unemployed

If you find yourself in a position where you are unemployed and need to rebuild your nest egg, there are a few things you can do to help ease the pressure. 

A job loss can be all-consuming, especially to those who haven’t had to deal with it before. The good news is that, with a little extra effort on your part, you can make it through this difficult time

Here are six tips for surviving a job loss.

What does job loss mean?

Job loss is a traumatic experience that can cause emotional, financial, and physical problems. It can also result in serious health complications, including suicide and post-traumatic stress disorder (PTSD)

emotional, financial, and physical problems

The loss of a job can be a very stressful time, especially if it’s not something you were expecting. It can be shocking to lose your job and you need to take some time to come to terms with what’s happened. 

It’s natural to feel a range of emotions, including:

  • Shock
  • Anger
  • Denial
  • Guilt
  • Regret
  • Helplessness
  • Sadness

While in the US, the job loss rate is 5%, it’s a very different story for the rest of the world. The unemployment rate in Europe is at 9.1% while in Africa, Asia, and Latin America it’s at 12.2%, 6.6%, and 4.4% respectively.

tips for cope with job loss

6 Tips for Surviving a Job Loss

If you’re unemployed or worried about losing your job, here’s how to cope with job loss and come out the other side stronger.

Know Your Basic Needs

The first thing you should do before deciding how to prepare financially for a job loss is to know what your basic needs are. You should figure out how much money you can realistically earn in a given month, and in what time period. 

Know Your Basic Needs

You will need to budget for everything that needs to be taken care of in your life. That includes:

  • Housing
  • Food
  • Clothing
  • Education
  • Transportation
  • Healthcare
  • Utilities
  • Insurance
  • Entertainment

Evaluate Your Income

Before making any drastic life changes, first, assess your financial situation. Make a few basic assumptions about the job you'll lose and your financial situation.

  • Are you making a decent salary? 
  • Will you get unemployed?
  • If so, what will the payments be? 
  • Will you need to file for unemployment?

If you are unemployed, you may need to sell some items to make up the difference. An example could be a car that doesn't work, stocks that are below $5,000, or even property that is underwater

The more specific you are with your assumptions, the better. If you are not laid off but find yourself unexpectedly facing job loss, be careful to avoid buying any extra items on a credit card.

Cut Unnecessary Expenses

If you need money, the first thing you should do is cut any unnecessary spending. Remember that you’ll be forced to live on a tight budget while searching for a new job. 

unnecessary expenses

Plan ahead to avoid unnecessary expenses by setting a budget for your personal expenses. This will enable you to spend wisely and prevent you from having an out-of-control spending habit. 

Pay Off Debts, If you have any high-interest credit card debts or high monthly car payments, it may be time to pay them off. Doing so will not only improve your credit score but also free up a substantial amount of money. 

Review Your Savings, If you don’t have a decent amount of savings, now is the perfect time to review your savings. If you have a nest egg of just $50 or $100, it may be time to go on a spending binge.

Build an Emergency Fund

You don't have to have a ton of money in the bank, but you do need to build an emergency fund. At a minimum, aim to save a few thousand dollars to help you weather the job loss storm

Emergency Fund

You don't have to take the entire money out of your paycheck, but make sure you're only using the amount necessary to cover your expenses and have the rest available for emergencies

Spend less on Expenses You Don't Need. when you're faced with a financial situation like a job loss, it can be tempting to immediately spend money to improve your situation. 

However, you should resist this urge. You may need to adjust your spending, but don't make drastic cuts to the types of things you like to spend your money on.

Use Your Unemployment Benefits

If you are unemployed, you may be eligible for unemployment benefits. In many cases, unemployment benefits are paid out at a slightly higher rate than what you would receive for other wages. 

unemployment benefits

This is because your unemployment benefits are funded by the federal government, so higher unemployment benefits are paid out if unemployment levels increase. There's no maximum length of time you're eligible to receive unemployment benefits.

You can apply for benefits as early as you have been unemployed for more than six weeks. 

Be sure to also keep up with state and federal employment requirements to receive the maximum benefits for your state. You also can't receive unemployment benefits if you're receiving Social Security disability benefits or SSI benefits.

Consider Insurance

The first thing you need to think about is insurance. You can start with disability insurance. This is insurance designed to help you continue to earn a living if you are unable to work due to a medical condition.

If you need the money, you can get help from this insurance. As long as you are able to pay the premiums, it is not too expensive.

insurance

You can also look into an Permanent life insurance policy. This is more of a long-term option for a backup cash value from your insurance policy. 

Be Prepared to Settle for Less For a long time, there has been a stigma around accepting a lower salary in exchange for an increased amount of work experience.

The reality is, though, that you should not hesitate to negotiate if you find yourself in this position.

Lose Your Job

Original source from pikisuperstar

What do you do when you lose your job?

After you’ve lost your job, there are a lot of fears running through. If you’re unsure what to do when you’ve been laid off, or you’re at the mercy of your company and they’re shutting down.

You’ll be surprised to learn that you are legally protected from any of the common financial pitfalls that people run into when they find themselves unemployed. 

skills worker

If you're lucky, you may even be able to leverage your experience and skills for a higher-paying job, which could provide you with the funds you need to get back on track financially.

In the long run, it's much better to be proactive in your situation, rather than reactive. Use this blog post as a resource to better understand what you can do, and what you shouldn't do, to prepare financially for a job loss.

budgeting

1. Learn to budget

Take control of your finances, and start budgeting. If you don’t budget, you won’t have a clear idea of how much money you have to spend, and how much you have to save. 

exercise

2. Take care of your health to protect your long-term economic security

It's important to take care of your health in order to protect your long-term economic security. The most important thing to do when it comes to your health is to eat well and exercise

As Elizabeth Gilbert writes in her best-seller Eat, Pray, Love, “If you can’t stand it when someone does something, then you’re not alone".

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3. Try a freelancing if you're not able to find full-time work

If you’re looking for full-time employment and don’t find it, try looking at a freelancer job. Fiverr is a great way to get your foot in the door of a company, and it shows you’re willing to work.

Learn how to apply for a freelancer job: Use your resume as well. Include the skills you have, so it gives them control over when and where to find you. or you can explore Fiverr learn on picking up extra skills.

learning

4. Work on improving and developing skills for future employment opportunities

The point of this article is to inspire you to work hard and reach for your dreams. You might not get to the point where you’re at now, but you have to keep striving and pushing yourself.

You can’t just sit back and let life pass you by, you have to work hard to get to where you want to be. 

These courses are available on fiverr and can be completed by anyone with the desire to learn :

What was the first thing you did after you lost your job?

It’s easy to think that after you get fired from your job, you should have nothing to worry about financially. However, there are still a number of expenses that you’ll have Probably, you panicked and began to figure out how to make ends meet.

to do list

Perhaps you even took out an emergency loan to help cover costs. That was a bad idea. you were also putting yourself at risk of receiving a high-interest loan from a credit card. I would highly recommend you stop doing that immediately.

let’s talk about what's important to take steps to help yourself in this situation.

roadmapping

1. Create a Vision for Your Future

It’s important to have a vision for your future and to work towards it. If you don’t have a vision for your future, then you won’t have a reason to work hard.

Having a vision for your future will help you to push forward and work towards your goals and dreams. 

finding yourself

2. Understand What You Can and Can't Do

This new advice is a bit of a letdown. At first glance, it looks like it could be spun into a way for individuals to discover the best career for them, but in reality, there are only two pieces of advice in this section: "Know where you want to go" and "Do what you're good at." 

The focus is on what you can do right now rather than future career goals.

interview

3. Manage your time wisely while looking for a new job

The first thing you need to do when you’re job hunting is to get your head around what you need to do to find a new job. You’ve likely heard the surplus of job listings out there and they’ve told you that it’s pretty easy to land a new position. It’s not.

Expect to put in hundreds of applications and interviews (usually) over the next few months.

It doesn’t matter if your previous employer looked bad on paper. It doesn’t matter if you were fired from your previous job. It doesn’t matter if you had a bad attitude toward the company.

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4. Take advantage of opportunities to Freelancing

It’s important to take advantage of opportunities to Freelancing. If you work from home, you don’t have to pay for parking, and you don’t have to travel to work.

Freelancing is the fastest growing industry in the U.S, according to a recent study by freelancing platform Upwork and the Freelancers Union

When you work at home and save money on personal convenience (aka hygiene), it frees up your time to stretch out whatever lifestyle you’re in right now. Explore Fiverr learn on picking up extra skills.

finding opportunity

5. Pursue Opportunities Instead of Hoping They'll Come To You

Don't wait for opportunities to come to you. Be the courageous one who jumps in front of the opportunity. I was too scared to write things I didn’t think I’d be brave enough to put out in the world.

To this day, I hate the first draft of my words. It takes everything I’ve got to stage that initial effort. I didn’t have the courage to take the leap. I didn’t want to fail. But the opportunity came anyway.

If you have other questions about "How to Prepare Financially for a Job Loss", please feel free to leave a comment and I will do my best to answer your question.

About the author 

Income Junctions

Business Idea & Investing for Solopreneur Income Junctions helps you to find ways to make money online, get inspiration and advice to starting a business on your own, and investing tips for solopreneur.

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