Facing the possibility of a layoff is a financial fear that many Americans share. It can be an overwhelming and uncertain experience. The sudden loss of a job can leave you feeling shaken and unsure of what lies ahead. But amidst the initial shock, it’s crucial to remember that there are steps you can take to regain control of your situation and set yourself up for a brighter future.
In this blog, we’ll explore five wise moves you can make if you find yourself laid off. From financial strategies to insurance plans, we’ll provide practical advice and insights to help you keep your boat afloat in these tough times. So let’s dive in and discover what actions you must take to avoid the sudden crises usually followed by being unemployed.
Unfortunately, layoffs are becoming increasingly common in today’s job market. However, you can take steps to navigate the financial implications and regain control of your situation. Here are five friendly and practical steps to consider:
Your priority should be replacing as much of your income as possible. Start by filing for unemployment benefits in the state where you were employed. The amount and duration of benefits vary by state, typically providing around 50% of your previous income up to a sure cap. These benefits usually last for approximately 26 weeks or six months.
Aside from replacing your income, ensuring health insurance coverage is absolutely essential. If you’re married, it’s worth looking into the possibility of joining your spouse’s plan for continued coverage. Another avenue to explore is continuing your current health insurance through COBRA, which allows you to maintain the same coverage for up to 18 to 36 months. However, keep in mind that COBRA can be pricier compared to the cost you paid as an employee.
Alternatively, you can enroll in a health insurance plan through the Health Insurance Marketplace, potentially qualifying for subsidies based on your income. Remember to adhere to the enrollment deadlines after your employment ends.
If you have a health savings account, you can use it to pay your health insurance premiums tax-free while receiving unemployment benefits. This can be a smart way to manage your healthcare expenses while maximizing the benefits of your HSA. By utilizing this strategy, you can make the most of your financial resources during this challenging period.
Though it may not feel like an immediate concern, ensuring that your family remains protected by life insurance is essential; first, check if you can continue coverage under your previous employer, provided the policy is portable. If not, consider using an online calculator to estimate the appropriate amount of insurance coverage you need and explore low-cost term life insurance policies.
Now is the time to start managing your finances more closely. If you haven’t created a budget or tracked your expenses before, review your bank and credit card statements from the past three months. Record your expenses on a worksheet or budgeting app to clearly understand where your money is going.
Determine where you can cut back your expenses, considering this is temporary until you secure a new job. Embrace frugality and prioritize essential expenses like rent or mortgage payments, utility bills, car payments, and food and medical care over unsecured debt payments. If you’re struggling, consider negotiating an affordable payment plan with your creditors or seeking assistance from a non-profit credit counseling agency.
Regarding your former employer’s retirement plan, you have three options: leaving it in place, cashing it out, or rolling it into an Individual Retirement Account (IRA). Leaving the plan untouched can be beneficial if it offers unique investment options or if you have employer stock that could be subject to lower tax rates.
Cashing out should generally be avoided as it incurs taxes on pre-tax funds and a 10% penalty unless you’re 55 or older in the year you leave the company. Rolling your account into an IRA provides tax deferral benefits and increased investment and withdrawal flexibility.
Remember, finding a new job should be your ultimate goal. Keep your resume updated, reach out to your network, sharpen your networking and interviewing skills, and start your job hunt. Once you land a job, prioritize building an emergency savings fund that covers at least three to six months’ worth of necessary expenses. Experiencing a layoff can serve as a powerful reminder of the importance of this financial safety net. Stay positive, remain proactive, and take these steps to regain your financial stability.
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