I’ve been laid off, lost my job, quit my job, and been on strike. Those were not fun times.
But the times that were the most tolerable were when I had time to prepare for the changes to my finances.
The more you can prepare for a layoff, or strike, or any kind of change in job status, the easier it is to ride out the storm.
How to Prepare for a Layoff
Hearing that you are going to be laid off is devastating, especially if you don’t have an emergency fund. It can be easy to sink into despair, but don’t! Inaction almost always makes things more difficult.
First, determine the timeline for the layoff. Have you been laid off effectively immediately? Or is your last day a couple of months from now? Is the layoff permanent or temporary? Knowing this information can help you determine your plan of attack.
Find out what benefits will be available to you during the layoff. Will you be eligible for any kind of unemployment pay, and if so how do you access it? Will you still have health insurance and at what costs? If you will need to make other arrangements for healthcare, you will need to research health insurance plans that will work for your family and budget.
Get serious about saving now. If you’re fortunate enough to have some advance warning (whether official or simple a “gut feeling”), then it’s time to start saving every penny you can to prepare. Try to pay off any debt that you have. Stock up on pantry staples when they are on sale. Try not to buy anything that isn’t absolutely necessary and then, when you do, try to buy secondhand.
If you’ve got a month or longer to prepare, adjust your income tax withholding to boost your paycheck and put a hold on contributing to retirement accounts. Put the money into an easily accessible emergency fund. Don’t forget to re-adjust your tax withholding as soon as your back on the job or you could face a big tax bill next year.
Figure out a new budget. A different income means it’s time to go back to the drawing board when it comes to your budget. If you’ve been tracking your expenses, you should know where your money goes. Now is the time to see how you can trim more from your budget. Make sure your entire family knows the seriousness of your situation.
Get tough on cutting things from your budget. This part sucks. Believe me I know! But when you don’t have any money coming (or a lot less), you have to make a change. Cut your cable, consider parking your vehicle for awhile (if possible), eliminate eating out, drop gym memberships, and cut out expensive habits like smoking, drinking or gambling. Take advantage of free activities in your community and start using your library.
Keep your internet connected. Some folks think this is a place to cut, but I disagree. The internet is your connection to job searches and networking. It’s a source of free entertainment. And it is a great place to research all of the money-saving ideas you will need to get through these tough times. If you must cut your internet, make sure it’s one of the last things to go. Then use the internet at your public library until you’re back on your feet.
Talk to your creditors about your change in situation. In the case of your student loans, you may be able to defer payments while you are unemployed. You may be able to negotiate new and better terms for your credit card debt.
Try not to add more debt. I know that it is extremely difficult to not rely on credit cards when money is tight, but if you can avoid it, you will be in a much better financial situation when you return to work. See if you can find other ways to pay for what you need such as bartering or shopping secondhand.
Seek out help in your community. If you are having difficulties paying for basics like food and utilities, find out what help is available in your community. You may be eligible for assistance from your local food bank or be able to get help with your utility bills.
Network, network, network. Be sure to let people know about your new employment status and that you are available to work. Share your skills and knowledge in your community. Keep active in your field so that you maintain those marketable skills you’ll need if you have to find a new job. Don’t bad-mouth the place you were laid off from. Be professional and an eye open for other opportunities around you.
Find ways to bring in extra money. See if you can bring in a little extra money through some side jobs like babysitting, dog walking, or lawn mowing. Find ways to make money with Fiverr or pick up freelance work through a service like Odesk. Get on your computer and make a little money taking online surveys and using Swagbucks. Have a garage sale or sell your stuff on Craigslist or on eBay to make some extra cash.
Stay positive. Going through a layoff is extremely stressful and you will go through a wide range of negative emotions. Try to use the experience to see all the good around you and to reconnect with family and friends. Use the time to assess what is most important to you and then start taking positive steps to make those goals a reality. Don’t give up!
For more inspiration, read Financial Change: Getting Through the Tight Times.