Laid Off? Six Steps to Manage Your Finances

Laid Off? Six Steps to Manage Your Finances

No one is immune from layoffs. Whether you're 22 or 52, odds are that sooner or later you will find yourself, often through no fault of your own, out of work. So it makes sense to plan ahead. Most financial advisers suggest saving the equivalent of six months' salary to tide you over if you lose your job. You will probably need more, especially if you have a family and are the primary wage earner.  

However, most of us do not think about that possibility until we are actually laid off. So what should you do if you haven't prepared?

Here are six tips:

Determine How You Are Spending Your Money

When times are good, most people do not think about how they spend money. We know how much the mortgage or rent and monthly car payments are, but we don't pay attention to daily spending. How much do we spend going out to eat? What is our weekly grocery bill? What about utilities and insurance? Being more aware of how you spend your money will cause you to spend it more carefully.

See Where You Can Cut Back

If you're facing a layoff, you need to come up with a plan for cutting expenses. Develop a budget that eliminates most unnecessary expenses, but don't completely cut entertainment. You need to maintain your spirits and keep up with contacts. However, you can cut back on those expenses substantially. Locate inexpensive places to go out to eat and drink. Go to movies instead of plays, and look for discount admissions. Don't give up the gym but consider joining a less expensive one, unless you use the gym to make business contacts. Turn your thermostat down in the winter and up in summer.

Avoid Major Purchases

This is no time to buy that new car or plasma TV. If you are already in debt, particularly credit card debt, you may want to consolidate your loans into a single monthly payment with a lower interest rate. If you own a home, consider a low-interest home equity loan.

Negotiate a Severance Package

When you're let go, you will probably be offered some severance. You should have negotiated that severance when you were hired, because that is when you have the most bargaining power. But you can still try to negotiate a better package at the time you are terminated.

Take Advantage of Available Programs

A number of governmental programs are available to help you in the event of a layoff -- take advantage of them. You will most likely be eligible for unemployment insurance. In some states, you may also be eligible for training, loans or unemployment while you set up your own business.

Find Part-Time Work

You will be able to stretch your savings if you have additional income. Consider part-time work while you look for a job. While it would be best if you could find temporary or part-time work in your field, your hobbies and other interests may offer possibilities for income. Remember: Your primary job is to find a new job. Any part-time work should allow time and flexibility to actively pursue your job search.

You may be unemployed for only a short time, and a change in your spending habits may turn out to be unnecessary. But no matter how good your prospects, it won't hurt to get your finances in order. If you get a job quickly, it may help you to start saving and investing for the future. However, a little financial planning may keep you from having to settle for a job you don't want simply because you've run out of money.

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