Tackling Special Situations
IF YOU LOSE YOUR JOB
I lost my job yesterday after 11 years at the company. I was tempted not to tell my family last night, but I did. I just don’t know how we’re going to make it financially.
Losing your job is traumatic under any circumstances, but particularly when unemployment is high and job prospects seem bleak. Vast numbers of American workers are being laid off, at the rate of over 50,000 per week in late 2008, with most economists predicting that the number of layoffs will grow even more in 2009. If you’ve recently joined the ranks of the unemployed, you need to attend to two very important but difficult matters. First, you must strive to overcome the personal anxiety you almost certainly are experiencing. Second, you need to assess your financial situation, so that you can cope with the loss of income. Above all, don’t panic. You can and will overcome this temporary setback.
OVERCOMING ANXIETY
You must overcome the inevitable psychological and emotional stress. Most people go through three stages of anxiety.
1. The immediate panic associated with the loss of employment. Your first reaction may be to hide this fact from your family and friends. Some people even go to the extreme of leaving home every day as if they were going to their job. Avoid this temptation. Your family and friends will provide enor mous support, and the more support you have, the easier it will be for you to get back on your feet and find another, probably better, job.
2. Guilt and lack of self-worth. After your initial panic has subsided, you may begin to blame yourself for your plight. You may feel that you have let yourself and your family down, and be convinced that job prospects are going to be pretty poor. Obviously, these feelings are not going to help your situation, but you need to recognize that you are likely to go through this stage.
3. Anger at the world. Finally, you will begin to feel angry about your situation, and it is not until you get through this last stage that you will be in the frame of mind to present yourself to a prospective employer convincingly. This stage typically leads to renewed self-confidence and determination.
Most important, you must be willing to ask for help. Other people can offer emotional support and can be a source of information about new employment opportunities. The sooner you face up to your situa tion, the sooner you will be able to evaluateyour financial situation, and the sooner you will be able to begin the search for a new job.
COPING WITH THE LOSS OF INCOME
In spite of the emotional trauma, you must evaluate your current financial situation realistically, so that you can adjust to your temporarily changed financial cir cumstances. This is particularly important because you have lost your job during a recession, and therefore, you may spend more time unemployed than you would during more prosperous times. You need to address the following matters.
• Understanding severance benefits. Be sure you understand your employer’s severance benefits, such as salary continuation, payment for accrued vacation, and insurance benefits. If you are about to be laid off or have just been laid off, it may be possible to negotiate additional severance benefits from your em ployer. Experts suggest that this be done within a day or two of the layoff, when the employer is most apt to respond to your appeal.
• Assuring the continuation of health and life insurance coverage. It is advantageous to continue to carry your employer-provided health and life insurance coverage, as well as any other insurance coverage that your employer offers and will allow you to continue. Most employ ers are required by law to allow you to continue your company health insurance plan for up to 18 months (or longer in some circumstances) without a medical checkup, as long as you pay the premiums. While the premiums may be steep, you should not go one minute without health insurance coverage. Alternatively, you might be able to save some money by purchasing a temporary insurance policy, which usually covers periods from three months to one year. Acquiring a new policy, even a temporary one, may require a medical checkup and/or preclude preexisting conditions. Be sure that the tem porary health insurance coverage does not leave any gaps that could cost you dearly when you can least afford it.
If your employer does not continue your life insur ance coverage, you may be able to convert your em ployer’s group policy to an individual policy. Other wise, you may be able to purchase low-cost life insurance coverage to replace your company-provided policy by shopping around for the best rates.
• Applying for unemployment compensation benefits. If you’ve been let go, you are entitled to collect unem - ployment compensation benefits. Strange as it may seem, some people, perhaps out of a sense of pride or out of embarrassment, don’t want to collect these benefits, even though they are eligible. By all means apply for unemployment compensation as soon as you lose your job.
• Summarizing your ready resources. Almost everyone is suffering from the current economic downturn, and if you are recently unemployed, you are doubly af fected. Your primary financial concern is how you’re going to meet your financial obligations during your unemployment period, so you should begin by summarizing your ready resources cash that is now avail - able, as well as any investments that can be sold in a short period of time. The following table will help you summarize your ready resources. Once you know how much or how little you have available, you can begin to prepare a budget that will sustain you during a period of unemployment.
• Reducing spending. Unless you are one of the few who are blessed with abundant ready resources, you are probably going to have to reduce your spending, at least for a while. Before you can do this, you should summarize your past spending patterns so that you can identify ways to cut expenses.
• Preparing a budget. Once you have figured out what income and resources you have ready and how you have been spending your money, you are ready to prepare a budget, which ideally should ensure that you will be able to meet important bills over the next six months. First, you should project your income, including any severance benefits, unemployment benefits, income from your spouse’s or partner’s job, and investment income, unless you will have to liquidate those investments to meet living expenses. Next, summarize your expected expenses, starting with the expenses that must be paid rent/mortgage, insurance, and groceries, for example and ending with those expenses that can be forgone, such as dining out and vacations. After you have summarized your projected ex penses, you can compare them with your expected income and decide how you are going to close the gap between income (probably too little) and expenses (probably too much). The key to dealing with the financial strain of unemployment is to reduce expenses as much as possible, and if your unemployment in come is insufficient to meet your reduced expense level, as it probably will be, you will have to use ready resources to help meet expenses.
Here are a few other tips:
• Keep up with your mortgage payments, since your house is probably your largest investment.
• You may be able to borrow from your or your spouse’s or partner’s company retirement savings [401(k) or 403(b)] plans or pension plan. But tapping into these important retirement plans should not be taken lightly.
• Other retirement accounts, such as IRAs and de ferred annuities, can also be tapped, although you’ll probably incur hefty taxes and a penalty.
• Consider part-time work to augment your income. You’ll be surprised at how much part-time work may be available, even during a severe recession.
• Weigh carefully the temptation that many laid-off people have of starting their own business.
• If it appears likely that you are going to have trouble meeting your obligations to creditors, be sure to contact them to try to work out a more comfort able payment schedule.
• The sooner you get to work conducting a job search, the better.
Losing your job is traumatic under any circumstances, but particularly when unemployment is high and job prospects seem bleak. Vast numbers of American workers are being laid off, at the rate of over 50,000 per week in late 2008, with most economists predicting that the number of layoffs will grow even more in 2009. If you’ve recently joined the ranks of the unemployed, you need to attend to two very important but difficult matters. First, you must strive to overcome the personal anxiety you almost certainly are experiencing. Second, you need to assess your financial situation, so that you can cope with the loss of income. Above all, don’t panic. You can and will overcome this temporary setback.
OVERCOMING ANXIETY
You must overcome the inevitable psychological and emotional stress. Most people go through three stages of anxiety.
1. The immediate panic associated with the loss of employment. Your first reaction may be to hide this fact from your family and friends. Some people even go to the extreme of leaving home every day as if they were going to their job. Avoid this temptation. Your family and friends will provide enor mous support, and the more support you have, the easier it will be for you to get back on your feet and find another, probably better, job.
2. Guilt and lack of self-worth. After your initial panic has subsided, you may begin to blame yourself for your plight. You may feel that you have let yourself and your family down, and be convinced that job prospects are going to be pretty poor. Obviously, these feelings are not going to help your situation, but you need to recognize that you are likely to go through this stage.
3. Anger at the world. Finally, you will begin to feel angry about your situation, and it is not until you get through this last stage that you will be in the frame of mind to present yourself to a prospective employer convincingly. This stage typically leads to renewed self-confidence and determination.
Most important, you must be willing to ask for help. Other people can offer emotional support and can be a source of information about new employment opportunities. The sooner you face up to your situa tion, the sooner you will be able to evaluateyour financial situation, and the sooner you will be able to begin the search for a new job.
COPING WITH THE LOSS OF INCOME
In spite of the emotional trauma, you must evaluate your current financial situation realistically, so that you can adjust to your temporarily changed financial cir cumstances. This is particularly important because you have lost your job during a recession, and therefore, you may spend more time unemployed than you would during more prosperous times. You need to address the following matters.
• Understanding severance benefits. Be sure you understand your employer’s severance benefits, such as salary continuation, payment for accrued vacation, and insurance benefits. If you are about to be laid off or have just been laid off, it may be possible to negotiate additional severance benefits from your em ployer. Experts suggest that this be done within a day or two of the layoff, when the employer is most apt to respond to your appeal.
• Assuring the continuation of health and life insurance coverage. It is advantageous to continue to carry your employer-provided health and life insurance coverage, as well as any other insurance coverage that your employer offers and will allow you to continue. Most employ ers are required by law to allow you to continue your company health insurance plan for up to 18 months (or longer in some circumstances) without a medical checkup, as long as you pay the premiums. While the premiums may be steep, you should not go one minute without health insurance coverage. Alternatively, you might be able to save some money by purchasing a temporary insurance policy, which usually covers periods from three months to one year. Acquiring a new policy, even a temporary one, may require a medical checkup and/or preclude preexisting conditions. Be sure that the tem porary health insurance coverage does not leave any gaps that could cost you dearly when you can least afford it.
If your employer does not continue your life insur ance coverage, you may be able to convert your em ployer’s group policy to an individual policy. Other wise, you may be able to purchase low-cost life insurance coverage to replace your company-provided policy by shopping around for the best rates.
• Applying for unemployment compensation benefits. If you’ve been let go, you are entitled to collect unem - ployment compensation benefits. Strange as it may seem, some people, perhaps out of a sense of pride or out of embarrassment, don’t want to collect these benefits, even though they are eligible. By all means apply for unemployment compensation as soon as you lose your job.
• Summarizing your ready resources. Almost everyone is suffering from the current economic downturn, and if you are recently unemployed, you are doubly af fected. Your primary financial concern is how you’re going to meet your financial obligations during your unemployment period, so you should begin by summarizing your ready resources cash that is now avail - able, as well as any investments that can be sold in a short period of time. The following table will help you summarize your ready resources. Once you know how much or how little you have available, you can begin to prepare a budget that will sustain you during a period of unemployment.
• Reducing spending. Unless you are one of the few who are blessed with abundant ready resources, you are probably going to have to reduce your spending, at least for a while. Before you can do this, you should summarize your past spending patterns so that you can identify ways to cut expenses.
• Preparing a budget. Once you have figured out what income and resources you have ready and how you have been spending your money, you are ready to prepare a budget, which ideally should ensure that you will be able to meet important bills over the next six months. First, you should project your income, including any severance benefits, unemployment benefits, income from your spouse’s or partner’s job, and investment income, unless you will have to liquidate those investments to meet living expenses. Next, summarize your expected expenses, starting with the expenses that must be paid rent/mortgage, insurance, and groceries, for example and ending with those expenses that can be forgone, such as dining out and vacations. After you have summarized your projected ex penses, you can compare them with your expected income and decide how you are going to close the gap between income (probably too little) and expenses (probably too much). The key to dealing with the financial strain of unemployment is to reduce expenses as much as possible, and if your unemployment in come is insufficient to meet your reduced expense level, as it probably will be, you will have to use ready resources to help meet expenses.
Here are a few other tips:
• Keep up with your mortgage payments, since your house is probably your largest investment.
• You may be able to borrow from your or your spouse’s or partner’s company retirement savings [401(k) or 403(b)] plans or pension plan. But tapping into these important retirement plans should not be taken lightly.
• Other retirement accounts, such as IRAs and de ferred annuities, can also be tapped, although you’ll probably incur hefty taxes and a penalty.
• Consider part-time work to augment your income. You’ll be surprised at how much part-time work may be available, even during a severe recession.
• Weigh carefully the temptation that many laid-off people have of starting their own business.
• If it appears likely that you are going to have trouble meeting your obligations to creditors, be sure to contact them to try to work out a more comfort able payment schedule.
• The sooner you get to work conducting a job search, the better.