Nobody takes pleasure in suddenly becoming unemployed. Just the ‘prospect’ alone can be very overwhelming and stressful. Often the worry or anxiety comes from feeling you have no control over the situation. This is partially true; you may not be able to control what your employer does but you can control to some extent how it will affect you and your family. The reality is, no one’s job is really secure but a layoff doesn’t have to be the end of the world. The key to survival is to be prepared, especially regarding money matters. Here are some financial tips for surviving a job loss:
Financial Tips for Surviving a Job Loss
1. Have emergency funds put aside to cover at least three-six months of your basic living expenses, such as your rent or mortgage, utilities, food and debt repayment.
2. Set up a line of credit while you’re still employed. I am always cautious giving this advice, especially to people who have trouble staying out of debt. While you have an income, go to your bank and see if you qualify for more credit. If you lose your job and have no replacement income or not enough to cover the monthly costs of running your household, you will be in real trouble. This is when people get desperate and max out their 18% (or more) credit cards or potentially file bankruptcy. So get a line of credit now just in case you’ll need one later.
3. Get out of as much debt as possible. Transfer high debt loans/credit cards to lower interest rate vehicles and then start aggressively paying them down. By reducing or eliminating your debt, you reduce the amount of money that leaves your pocket each month. If you lose your job, you want to be able to survive on as little amount of money for as long as possible.
4. Develop a ‘layoff’ budget before you lose your job. Figure out what sources of income you will have coming in such as EI and/or a severance package. Assess your basic living costs – mortgage/rent, utilities, loans, and food. Ensure you have an emergency reserve and/or line of credit established that would cover any shortfall in income over a six-month period.
5. Start living within your means now. This is generally a good idea, regardless of whether or not a layoff is looming, but if a potential job loss is on the near horizon, avoid any unnecessary purchases for the time being, such as a new car, vacation, or renovating your home. Live as frugally as you can now and bank any extra monies. We have heard it all before, leave the credit cards at home and pay cash for all purchases. Try to grocery shop only once a week. Eat out less. Re-evaluate all of your monthly bills and find ways to reduce them; call your phone provider and see if a better, less costly plan exists, let go of some of the cable channels. Get the whole family involved in the process. It will definitely teach your kids some smart money practices.
6. Find ways to bring in some extra money now and then bank it. You could have a garage sale, sell items you don’t need anymore on eBay or assess your skills and see if there’s something you can do on the side for extra income or get a part time job now. Necessity is a time for creativity. Most importantly, bank all the extra monies you bring in.
If you are fortunate enough to be notified ahead of time of a layoff then I would highly suggest that you use that time to your advantage. Don’t just wait for the pink slip to be given. Even using one of the financial tips for surviving a job loss I have given you will make a difference to your overall financial health. The reality is that a layoff could happen at any time and it’s best to be prepared. Hope for the best but prepare for the worst.