The First Seven Financial Steps to Take Immediately After Leaving Your Job
Shock, confusion and panic are normal reactions when you find out you’ve been fired . As difficult as it may be, try to maintain a calm and rational perspective during this transition period. Taking certain financial steps quickly can help reduce concerns about your future financial situation. Here are some important financial steps to take immediately after leaving your job.
Actions after dismissal
Apply for unemployment benefits
This should be your very first step. Unemployment benefits provide temporary benefits while you are out of work and actively looking for a new job. The amount and duration vary by state. File your claim as soon as possible after losing your job so your benefits can start sooner.
Evaluate your budget and cut unnecessary expenses.
With less income, you will have to be very frugal. Review all your current expenses and try to identify ways to cut them . A good place to start is learning online budgeting tools , the envelope method , and holding monthly personal finance meetings . Consider a temporary budget for only the essentials until you have a plan in place.
Contact creditors and service providers to arrange payments
For any outstanding debts, such as personal loans, auto loans and mortgages, contact your creditors to explain your job loss situation. See if they can offer reduced or suspend payments for a short time. Also contact utility companies, phone/internet service providers, insurance companies, etc. and ask for billing relaxations or payment plans to be adjusted. Why might this hack work? Service representatives are often empowered to make changes to keep you as a customer. Anything for customer loyalty, right?
Apply for COBRA if you had employer-sponsored health insurance.
One of the worst problems when losing your job is having to find health insurance. Even with employment, navigating health insurance is one hell of a landscape .
Luckily, you have several options , although there are tradeoffs between quality and price. Under COBRA, you can continue to have the same health insurance for 18 months, but you will have to pay the full premiums. Consider the costs carefully. Check whether enrolling in your spouse’s employer’s plan or applying for a marketplace plan makes more financial sense.
Withdraw contributions from your Flexible Savings Account (FSA)
If you have money left in your employer’s FSA account , withdraw it before you lose access to those funds. This money can help cover medical and dependent care costs during unemployment.
Resist the urge to cash out your retirement funds early.
When you’re stuck in the present, it’s easy to think of retirement as a distant dream. While it is tempting, withdrawing these funds should be a last resort . You’ll face tax penalties and lose out on future growth that comes from deferring taxes. Try, no matter what, to leave your retirement accounts intact.
Create your emergency fund
If you receive severance pay, unemployment benefits, or have other savings, use this reserve to create a cash cushion that will provide protection against unexpected expenses. Try to have 3-6 months’ worth of basic living expenses saved .
While the emotional impact of losing a job is significant, it is also important to focus on the financial impact and take steps right away to protect yourself financially. A good place to start is by searching for the American Job Center (or other government services such as JobsNYC ) that help people find jobs, get training, and answer other employment-related questions. Moving forward, continue to cut costs and remain disciplined and motivated in your job search .