You could lose your job tomorrow. I’m not trying to jinx you. It’s just a real life possibility for anyone, at any time. Jobs are lost all the time. It happens. Are you prepared for it? What would be your first step? And the second? What about the third? Just like insurance, planning for the worst isn’t asking for it, it’s just smart. Here’s my ‘so you lost your job’ exercise, the four items you need to deal with when you lose your job, in order.
Your ‘I lost my job’ plan of action:
1.a – Income:
The first obvious obstacle when you lose your job is income. Your mission is to find a new job to replace this income. If you get a severance package don’t take a three month paid vacation. Start looking for work immediately. Also, if you qualify for unemployment, by all means file! The max payout in Indiana is $390 a week. This may or may not be enough to pay your bills, but it can’t hurt.
1.b – Health Insurance:
Maintaining healthcare coverage is equally important to replacing your income. There are a couple of ways to stay insured while unemployed. COBRA is a government act which helps you maintain coverage during unemployment. The only downside is it’s expensive. If you are let go during open enrollment your better bet is to search the healthcare.gov marketplace for cheaper coverage.
2. Life Insurance:
Most people are guilty of viewing life insurance as an afterthought. And if your employer has provided it for you, you probably haven’t thought twice about it. Well, now you have to start thinking. You may be able to convert your policy, if you can, do it. If not, call your insurance agent and add a life insurance policy. The type you get really depends on what you and advisor decide is best for you, I’m most concerned with the face value of the policy. Getting the right amount is most important.
3. Retirement Plan:
I’m in the minority of advice-givers on this one. You’ve seen the billboards, “Let go? We’ll help you rollover your 401(k) today!” But it’s my opinion that this is way down on your priority list. Here’s the thing, if you leave your 401(k) for a bit, nothing will happen. Your employer can’t take your money, you won’t lose it. It just sits there. You just lost your job, you’re a little busy. You have a lot of balls to juggle for the next few weeks. Let your 401(k) be for the moment. It’s not going anywhere. Eventually you’ll need to deal with it, but get the three other things on this list taken care of first.
Your financial life can change in one instant. There’s no denying it’ll be rough going for a bit, but by switching into action mode you can prevent further damage. Not a reader? I get that. Listen to me work through this action plan on The Pete the Planner Radio Show on WIBC below.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.
Well I’ve been through the unemployment phase 3 times in the past 4 years, the very nature of consulting and it sucks each time.
Unemployment insurance won’t kick in immediately. If you have a nice letter of separation stating you were laid off, expect to wait about a month before the money $ starts flowing to you, longer if you were given severance, and there is a 1 week waiting period where you do not qualify for any money. Now if you were terminated for no-reason “at-will” or fired without just cause, expect to wait MANY months for the money $ to flow because now the state has to take time to investigate, phone interview, write letters, hearings, etc… and to make a long short story short it can be 2-3 months before getting your first claim made the second week of unemployment paid out to you.
Healthcare – I have not yet had the pleasure of applying on the exchange but a high-deductible (>$3500) emergency plan still cost $250-$300 a month. Very costly at the minimum benefits. If you know the job loss is coming, sometimes you smell it in the air, or actually know…, stock up on all your meds with prescriptions. Get all your annual Dr’s appointments in for the year or the ones you need for the prescriptions.
Retirement Plan – Do not cash out anything in desperation during your unemployment phase without reporting it as income otherwise the state will go after you for fraud. If that desperate, wait until after you have exhausted state benefits.
I would recommend 6-12 months liquid money for unemployment + a sum for emergency funds + an additional sum of moving/relocation money in case the 6 months come along and you need to relocate for a new job because you would be broke.