In this era of corporate takeovers, downsizing, mergers, layoffs, and, most recently, stunning corporate corruption and the COVID-19 pandemic, it’s rare for someone to remain in the same job for her or his lifetime.
You don’t need to be paranoid, but being prepared for the possibility of job loss will make it easier to deal with if it does happen. To be prepared, you need to know your net worth, set up a budget, save, and keep your debt low.
You should also have a feel for the stability of your job. How are your employer’s competitors doing? Are they experiencing layoffs? Layoffs in your industry can be a good indication of the instability of your job, even if your employer has not yet made any cuts. If job layoffs have already occurred where you work, you should keep your resume updated and be looking around for possible job opportunities that fit your skills. Compile a list of references, with job titles, online information, telephone numbers, and addresses, and line up letters of recommendation. It’s also a good idea to get contact information from coworkers, vendors, and customers to use for networking purposes.
Next, acquaint yourself with your employer’s severance policy. Do laid-off employees receive severance pay? If so, is it based on years of service or other criteria? Will you be paid your accrued vacation balance upon termination? What will happen to your benefits if you lose your job? Will you be able to continue your health insurance benefits under the Consolidation Omnibus Budget Reconciliation Act (COBRA)? How much will it cost? It’s foolhardy to go without at least catastrophic health insurance, so know what your other alternatives are if you can’t afford to elect COBRA coverage (note that COBRA is often much more expensive than the monthly deduction from your paycheck—you have to pay the entire bill without the help of your employer). An illness or accident while you’re uninsured could leave you no alternative but bankruptcy.
If you get fired from your job, apply for unemployment on the first day so you’ll receive the maximum benefits for which you’re eligible. Filing for unemployment can call up negative feelings; a lot of people’s feelings of self-worth are connected to their jobs, and losing a job can feel like a failure (it’s not). Don’t let emotions get in the way of applying for this valuable source of funds while you’re looking for a new job. Your employer contributes to your state’s unemployment insurance fund as well as a federal unemployment fund. You earned those benefits by working. If you need them, use them. It’s just like any other kind of insurance—you file a claim when you’ve suffered a loss.
Unemployment benefits are typically about half of your regular earnings, up to your state’s cap, paid for a maximum of twenty-six weeks. Your state’s cap is based on the average wages in your state. For instance, the state maximum benefit in Massachusetts, effective October 2019, is $823 per week, while South Dakota’s is $352 a week. You’ll be required to prove that you’re actively seeking work while receiving unemployment benefits, and you must be ready, willing, available, and able to work. Unemployment benefits are subject to federal income tax, so you’ll need to claim them at the end of the year. Be prepared for the additional taxes you may owe as a result.
During a period of unemployment, resist the urge to use your credit cards unless absolutely necessary for critically important expenses. If you can’t make ends meet, contact your creditors, tell them you’ve lost your job but are actively seeking employment, and request an arrangement that allows you to make reduced payments for a limited time.