As more and more headlines emerge of sweeping layoffs among our country’s major corporations, unemployment doesn’t appear to be slowing down anytime soon. As organizations struggle with reduced revenue and profit, they’re scrambling to find ways to slash expenses, and that often means eliminating jobs.
Finding yourself unemployed can be disheartening and scary, especially if you lost your job unexpectedly. But with some financial savviness, education, determination, and hard work, you can learn how to manage your money when you’re unemployed and bounce back strong.
If you’re currently employed, it’s still a good idea to get a handle on your finances and know your options in the unfortunate event that you find yourself without a job in the future.
Taking these seven steps during unemployment will help you maintain a strong financial foothold throughout this time.
- Take stock of your current financial situation.
- Reassess your budget.
- Find assistance.
- Explore temporary income opportunities.
- Work toward finding new full-time employment.
- Set goals for yourself.
- Take care of yourself emotionally.
These steps might feel overwhelming at first, but taking care of yourself financially can help you avoid completely derailing any financial progress you’ve made and make it easier to get back on your feet again.
7 Financial Tips for Weathering Unemployment
These tips will help you increase your confidence and financial stability—both crucial components of navigating unemployment.
1. Take stock of your current financial situation.
The first step after a job loss is to take a deep breath, then begin to assess your financial situation. You can’t plan for the near future if you don’t have a firm grasp on where you’re starting from. First, carefully review your severance package (if you were given one) to see if your company is offering you temporary income.
Assess your emergency fund and liquid assets
Unemployment can count as a financial emergency, especially if you have dependents relying on you for shelter and food. Ideally, you should have an emergency fund tucked away in a highly liquid account, such as a savings account, that you can access for your everyday essentials. Now is the time to also check your checking account and other savings accounts as well to see all the funds you have at your disposal.
Next, add up all of your debts/monthly obligations to get a handle on your financial obligations. Review your credit card and bank accounts to see recent purchases and income statements to get a sense of your weekly and monthly cash flow.
Consider your health insurance
If you were receiving company-sponsored health insurance, you’ll want to figure out your next step for ensuring you and your family continue to receive health benefits. The last thing you want during unemployment is for a health crisis to further deplete your finances.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) helps workers and their families continue to receive their employer-sponsored group health benefits after they have voluntarily or involuntarily left their place of employment.
This continuation coverage can last for approximately 18 months. Individuals are required to pay the entire premium themselves (and an administrative fee) to receive COBRA coverage. This could be quite expensive and a shock to your budget if you have been receiving free or reduced health insurance from your employer.
You can also sign up for Health Insurance Marketplace. Losing your job qualifies you for a “special enrollment period” — meaning you have 60 days from your last day of work to apply for coverage. This coverage will last for the remainder of the year. You may qualify for additional savings or free coverage from Medicaid or the Children’s Health Insurance Program (CHIP) for your children.
2. Reassess your budget.
Your budget can help you quickly see how much money you need to have each month to keep a roof over your head and maintain the essentials for your family. It can also show you where you can cut expenses down by eliminating your discretionary spending.
Comb through each line item to see if it’s truly necessary or if it can be reduced. You can even evaluate categories such as car insurance. If you were commuting many miles per day, perhaps you can reduce your coverage to account for your new lifestyle and save money on your premiums.
Ruthlessly cutting down on unnecessary expenses will help your emergency savings stretch as far as possible. Consider these tips to save money when you lose your job:
- Cut back on ordering take-out, food delivery, or restaurant meals and instead cook at home.
- Pause maintenance services and take care of the tasks yourself.
- Stop streaming subscriptions and utilize free entertainment from the library.
- Cancel gym memberships and use free workout videos online.
- Limit excursions to the movie theater, concerts, etc.
- Temporarily pause leisurely travel and explore free activities in your local community.
You likely will have more time on your hands during this season, which can help you further cut down on expenses such as car washes or oil changes because (with a little training) you can do these services yourself. Remember, you can always go back to outsourcing once you’re gainfully employed again.
3. Find assistance.
As soon as your unemployment begins, you should apply for unemployment benefits, if necessary. Also known as unemployment insurance, these benefits can financially help individuals who have lost their job through no fault of their own. The application and approval process can take several weeks, so be sure to file as soon as you can.
Unemployment benefits are state-managed, so check your state’s details and requirements for specific information. Once approved, your benefits can often be directly deposited into your account. These benefits will not replace your former income completely, but they can help bridge the gap.
If you’re struggling to provide food for yourself and your family, check out local food pantries to help hold you over until you can pay for food again. You can also check out local charities for any clothing or other basic needs during this time.
If you’re carrying a lot of debt, don’t have an emergency fund, or are unable to pay your bills, reach out to your financial institutions (credit unions, utility companies, credit card companies, etc.) and explain your situation. They may be able to work with you on your payments and develop a payment plan that works for you during your unemployment. Being proactive will help you maintain your credit score and avoid penalties.
4. Explore temporary income opportunities.
While you’re waiting to find your next great opportunity, consider picking up some freelancing or side hustles in the meantime.
To add some additional cash to your monthly budget, consider:
- Driving for a ride-share program.
- Delivering food.
- Pet sitting.
- Cleaning houses or mowing lawns.
- Partnering with Upwork or Fiverr for freelance opportunities.
- Selling products online.
- Picking up shifts at your favorite local restaurant or grocery store.
- Renting out your car or a room in your home.
You can also try reaching out to a staffing agency to see if they can help you find a temporary job while you work to find something long-term. Often times, these opportunities can turn into a permanent gig in the long run.
If you do end up receiving unemployment benefits, check the requirements directly with your state’s unemployment office to find out if and how much you’re allowed to work while receiving benefits.
5. Work toward finding new full-time employment.
Losing your job can take a toll on your confidence. After dealing with the immediate fallout of unemployment, take some time to work on building your future by discovering new opportunities. You can attend networking events, increase your presence on sites such as LinkedIn, and let your local network of acquaintances know that you’re looking for work.
You can also use this time to update your resume so it’s ready to go when the perfect opportunity comes along. Increasing your skills and knowledge will also make you more marketable and competitive in the job market. There are even many free online certification courses available!
6. Set goals for yourself.
To help provide structure and purpose to your time and energy, create goals for yourself! Facing the task: “Find a new job” can be very overwhelming and vague, but by creating smaller, mini-sized goals, you can feel good about your progress and effort. Try setting achievable goals such as:
- Apply for two freelance or side gigs every day for one week.
- Update the experience section on my resume.
- Connect with three new people on LinkedIn who are in my field of work.
- Find one service or subscription I can temporarily cut during my unemployment.
These goals can help provide structure to your day and make the most of your free time.
7. Take care of yourself emotionally.
This tip isn’t directly related to your finances, but in the long run, taking care of yourself emotionally will empower you to pick yourself up and find new opportunities so you can continue your financial journey.
It’s okay to feel upset or sad about your job loss, acknowledge your feelings, no matter how painful they are. Consider talking to a friend or family member who will be a good support system.
Try to keep your thoughts toward employment positive ones. Chances are, you’ve been through tough times in the past, and have made it through to the other side. Remember that unemployment is temporary and you have the strength and abilities to make it through.
Find ways to practice self-care (for free) such as taking a walk, calling a friend, volunteering, or reading a book from the library.
Coming Back Strong: Life after Unemployment
Once you’ve weathered the storm and found another full-time job again, celebrate! You made it through a difficult time and probably learned a lot about your resiliency and character. As you slowly start receiving steady paychecks again, consider the following tips:
- Don’t immediately add back in every non-essential to your budget. Carefully consider which ones you genuinely want back and which ones could stay out.
- Use discretionary money for paying back outstanding bills. If you had to pause debt payments, utility bills, or any other financial obligation, prioritize these repayments before adding in non-essential items again.
- Set aside money from each paycheck to rebuild your emergency fund. If you had to use or completely deplete this fund, you should start building it again as soon as possible.
- Contribute to a retirement fund. You probably had to pause retirement contributions during your unemployment period, so make sure you resume these contributions as soon as you can at your new job.
Lafayette Federal is Your Credit Union for Life
Here at Lafayette Federal Credit Union, we support our members during the ups and downs, and offer the tools and resources to ensure you’re on the right financial path. Whether you need convenient, 24/7 online banking, a personal loan to get you through a difficult time, or a savings account with competitive savings rates, we have accounts and services that meet your needs.