Financial Checklist After a Job Loss

Whether you’ve recently lost your job, or are anticipating a job loss in your near future, it’s never easy to face being out of work, no matter the reasoning behind it. Losing a job can leave you reeling in more ways than one. There’s pressure to get back out there and rejoin the workforce as soon as you can.

However, this uncertain time may be a blessing in disguise. Facing job loss can help you to clarify what you want out of your career – both in the short and long term. It can also be a time for financial reflection as you build a budget that supports your expenses with limited cash flow. Although there are times you may feel overwhelmed, getting a handle on your financial situation should be one of the first things on your “to do” list.

Organizing your finances right now doesn’t need to be a daunting task. In fact, there are a few key steps for you to take now that will help you move forward with confidence in your job search and as you plan for your future.

Step One: Pare Down Expenses

The first step you should take after losing a job is to pare down expenses. Although you may not have been in control of whether or not you’re receiving income from your previous job, you are still in control of your personal finances. Start by listing all of your expenses – including recurring monthly expenses and what you simply choose to spend money on (like eating out).

Next, take a hard look at your expenses. Is there anything you can cut out in the short term? Maybe you don’t need to eat out as much as you currently do, or you can cut recurring monthly expenses – like cable.

Once you’ve decided what you can eliminate, look over the rest of your “expenses” list. Is there anything here that you can minimize? Sometimes calling your internet provider or insurance company and asking to negotiate rates, or clipping coupons for groceries, can free up extra money that will help you get through this tight time.

Step Two: Create a Budget

If you had a budget in place before your job loss – nice work! This step will be slightly easier for you, as you’ll just have to edit your existing budget to reflect your new expenses and loss of income. If you don’t have a budget set yet, don’t worry. This is an easy step to take, and will help you through your period of unemployment and beyond.

List your family’s current income, including any severance you may be receiving, along with your new list of pared-down expenses. If your expenses outweigh your income, you might consider tapping an emergency savings account to bridge the gap. Alternatively, you might consider getting a part-time job to get you through this period of time. If it’s necessary, cut any money that’s currently being funneled into retirement savings, college savings, or cash savings. It would be nice to continue saving during this period of time, but if continuing to save money means you won’t have enough cash flow to pay your bills – cut back. You can always make a commitment to rebuild savings after you find employment in the future.

Step Three: Contact Your Creditors

If you currently have debt, you need to contact your creditors. Whether you have student loans, auto loans, or credit card debt – reach out. Explain your situation, and ask if they offer any unemployment assistance programs. You may be surprised. If you reach out before you start missing critical payments, your creditors will likely be more willing to give you some grace or allow you to switch to a minimum monthly payment on your debt for a short time.

Step Four: Consider Your 401(k)

Retirement may be the last thing on your mind right now, but you have the opportunity to better prepare yourself for the future by making smart moves with your previous employer’s 401(k) plan. Depending on your plan’s unique policy, you may be unable to leave the plan with your previous employer. In some cases, you can move it to a new employer’s 401(k) plan when you get rehired somewhere else. In other cases, it may be in your best interest to roll your 401(k) over into a traditional IRA or a Roth IRA. Knowing which is best for you might require some research – or you could contact a fee-only financial planner to help you through this transition.

Step Five: Adjust Your Goals

Going through the loss of a job isn’t easy. You may be feeling angry, scared, overwhelmed, or like you’re the victim of an unfair situation. All of these feelings are valid. But instead of dwelling on the negative aspects of this situation, it can help to think positively. This is a time of unexpected transition. Still, you can use this window to get introspective and consider your goals. Some questions you may ask are:

  • Was I happy in my previous job?
  • What do I want to do next?
  • What do I want the next year of my career to look like? What about the next 5-10 years?
  • How do I want to spend my retirement?
  • Where do I want to live right now? How about when I retire?

Sometimes amazing life decisions come out of transitions that are forced on us. Take time to examine your existing goals and decide whether or not they’re what you still want. Don’t be afraid to dream big – there are great things in store for you, and the decisions you make now will help you get there.

During this time, it can be helpful to have a professional guide you through this checklist. From setting a budget to adjusting your long-term life goals and setting financial goals to match them, a financial planner can help. Contact Kelly Financial Planning today to learn more – I’d love to hear from you.