Losing your primary source of income can be one of the most stressful life events. Preparing for this potential outcome can help to increase your peace of mind and enable you to focus more on obtaining a new source of funds.
In this article, we will examine strategies for preparing for potential unemployment as well as steps you can take if you become unemployed.
If you think you might become unemployed in the future
If your industry is in a downturn or you have received forewarning of potential layoffs, these are actions you can take now to strengthen your personal finances:
Limit your spending
One of the first steps you should take is to perform a full assessment of your monthly spending and find areas where you can cut back. If you already have a budget, it will be easier to identify spending categories that you can reduce. If not, you should create a list of all your essential expenditures and prioritize them first. Look for any recurring non-essential expenses in your monthly budget. These might include subscriptions, restaurant meals or other entertainment costs.
You will also want to create a list of all outstanding debts in your name. If possible, you should continue to make the minimum payments on these debts to avoid incurring additional fees or interest charges.
Build your emergency fund
An emergency fund will help to cushion the impact of unemployment on your ability to pay your monthly expenses. If you already have an emergency fund, consider adding more money to it while you are still receiving a regular paycheck. If not, now is the time to divert some of your nonessential spending to an emergency fund.
Depending on your industry and the skill level needed for your work, it may take you weeks or months to find a new source of income. Consider this as you build your emergency fund. Some people save between three to six months for such contingencies; if you think it will take longer to find a new job, your emergency fund should be larger.
Start looking for new work opportunities
If you haven’t lost your source of income yet, but you think it’s a possibility in the short-term future, you should start looking for new opportunities as soon as possible. In an ideal scenario, you will be able to transition to the new job before your existing one disappears. Even if that is not possible, it will still help to get a head start on your search.
In addition to applying to job listings you find online, you should also reach out to your professional network. There is no reason to be embarrassed about becoming unemployed — it can happen to anyone at any time. The people in your network will likely want to help you. When you speak with them, be specific about the type of work you are looking for so that they can keep an eye out for opportunities.
Assess your options for temporary financial relief
Chances are, your home mortgage or apartment lease is your biggest recurring financial obligation. If you think you may lose your job soon, get in touch with your lender or landlord to make them aware of your situation. There are likely options you can leverage to decrease your financial stress in the near term. For example, your lender can help you decide if refinancing your mortgage will save you money on your monthly payments.
If you have recently lost your source of income
Often, unemployment can come without warning. During this stressful time, consider taking these steps to stabilize your financial situation:
Assess your monthly spending
If you have lost your main source of income, it is critical that you take the time to analyze how you spend your money. When you have a stable income, it is easy to not pay close attention to where each and every dollar goes. However, without an income, you need to be very careful in how you spend your money.
If you don’t already have a budget, create one now. You can use an app, spreadsheet or written list to track your essential and nonessential expenses. Until you find another source of income, you should do your best to reduce how much you spend on things like entertainment and dining out.
Take advantage of any support programs available to you
Although it may feel awkward to use government programs to supplement your income, you should not feel bad about doing so. While you were employed, you likely paid into these programs. Government assistance programs are there to help support you while you get back on your feet.
Find out what programs you qualify for, and then take advantage of them. While these programs may not provide enough funds to fully match your previous income, they will help to mitigate some of your stress. For example, state unemployment benefits can provide you with cash for essentials and SNAP benefits can help you continue to put food on the table while you look for work.
Find ways to reduce your expenses
Beyond cutting back on nonessential spending, there are a few other ways you can reduce your financial burden during this stressful time. For example, if you have the space, you can consider getting a roommate or renting out an extra bedroom in your home. A housemate can reduce your housing costs significantly and help you pay for shared expenses, like utilities.
If you have federal student loans, you may be able to apply for forbearance while you look for work. Remember, creditors want you to pay back your loans, and most are willing to work with you so that you can find a new source of income. Putting a pause on your payments can also greatly reduce your stress.
Look for temporary or part-time work
Finding a new full-time position may take longer than you want. This will depend greatly on your line of work and what the local economy is like. While you seek employment, you may want to consider short-term work. For instance, an employment agency can help you find temporary jobs that can not only supplement your income, but may also lead to full-time opportunities. You may even find a new career path.
While you are looking for work, where should you keep your cash? A checking account is a great option for keeping your money secure and accessible. With The Comerica Bank Access Checking account, all you need is a minimum opening deposit of $50. The account has no monthly fees for Comerica Web Banking® or Comerica Web Bill Pay®.
