Money Moves to Make When You Lose Your Job

Now for a topic that's not high on anyone's list of fun things to talk about: layoffs. No one wants to think about the possibility of getting a pink slip.

But at a time when many companies are scrutinizing their balance sheets and looking for ways to reduce expenses, even the most stable job can turn on a dime. If it happens to you, take solace: You can come out with your finances intact if you do a little planning.

And bear in mind that layoffs don't mean there's anything wrong with your job performance or your marketability. You will find another job, quite possibly one that's even better. But in the meantime, here are some steps to safeguard yourself financially.

If You See a Pink Slip on the Horizon, Start Stockpiling

Start by taking a full inventory of your monthly financial needs. (And if you don't already have a budget, here's How to Craft a Budget and a budgeting tool to help.)

Figure out what it takes to get through the month, dividing your expenses into two categories: necessities and things you can live without. Tally up your required expenses for things like a rent or mortgage payments, insurance, food and utilities. (While you're at it, see if you could cut costs by refinancing your mortgage and explore all your options in the new mortgage market.)

Stash away as much as you can so you'll have these expenses covered. Best case scenario: You've already got an emergency fund that will cover your expenses for three months. If so, good for you. You'll be able to weather your job transition beautifully. If not, there are other strategies for surviving this transition with going into debt. (Just visit the Credit Card Smarts message board, and you'll get plenty of warnings against abusing your credit cards.)


Cut Nonessential Expenses

Start by temporarily eliminating expenses you can live without. You can always reinstate your gym membership, your satellite TV subscription and your expensive cellular phone calling plan when you start your next job. It's better to cut back on nonessential expenses for a short time than to live on your credit cards and rack up the debt. Small financial changes will save you big bucks and will prevent you from having to work off big debts as soon as you start a new job.

Take Advantage of Workplace Benefits while You've Got Them

If you know a layoff is coming, make all your doctor and dentist appointments now. If you're eligible for an annual physical and a teeth cleaning, squeeze these in now while you're covered by your employer's health plan.

And don't forget to turn in reimbursements for everything from expenses incurred on the job to gym memberships and academic courses that may be included in your benefits package.

Also make sure you take vacation days and personal days now if you know you won't be paid for them in the event of a layoff. That doesn't mean you should call in sick for the next two weeks, but it does mean you should talk to your company's human resources representative about whether you can get extra pay instead of taking vacation days. If so, you may opt for that rather than taking time off.

Loan Yourself Some Money

As a last resort, you can give yourself a loan. If you have a 401(k) retirement plan at work, you may be able to borrow from it with the commitment that you'll repay the money later. This is a better solution for getting through a financially tight spot than charging your expenses to your credit cards at 19 percent interest. Choose a loan from yourself over debt any day.


But only tap your 401(k) if it's your last resort. To see why you should do as much as possible to preserve your retirement funds, see Preserve Your Nest Egg When Switching Jobs.

Unemployment Benefits Made Easy

Finally, don't forget about all the money that's been taken out of your paychecks over the years for unemployment insurance. This may be the perfect time to collect. Don't get bogged down by thoughts that filing for unemployment makes you some kind of slacker. On the contrary: Receiving unemployment pay is contingent on the fact that you're actively searching for a new job. Think of unemployment pay as just a temporary means of tiding yourself over until you find something new.

Laid-off employees are eligible for unemployment benefits for up to 26 weeks. File as soon as possible because it may take a few weeks before you receive your first check. Remember that your unemployment pay will be lower than your paycheck, so view it as a helping hand until you start another job.

The laws vary locally, so check with your state unemployment office for specific information about how and where to file. Some states have an automated system that allows you to file by phone. Be prepared with the following pieces of information: your social security number, your mailing address and phone number, the names and addresses of your employers for the past two years and alien registration information if you are not a U.S. citizen.

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