Just lost your job and figuring out your finances? Get a handle on these 3 things
Everyone has a different reaction to thinking about money after losing a job. It might be the first thing you want to wrap your mind around or something you avoid as long as possible.
But no matter where you stand, here are three decisions you will want to be thinking about sooner rather than later.
How Will You Be Paid Out?
You may have the option to choose if you’re paid out in a lump sum or in a stream of payments. A stream of payments may provide you with benefits for longer (e.g., health insurance) and be helpful for budgeting purposes. However, if you’re concerned about your employer’s financial status, getting paid out quicker via the lump sum may make more sense. Just be sure you are factoring in the tax implications of the option you choose (for example, money paid out as a bonus will be taxed at higher rates).
Will You File for Unemployment Insurance?
Many people who are unexpectedly unemployed are eligible for unemployment insurance. To determine eligibility, you will want to review your state’s specific guidelines. You should know that if you apply to become an independent business owner or contractor you will not be eligible for unemployment benefits.
What About Benefits?
While many companies will continue to provide health insurance for a period of time after a termination, it’s important to understand how long that period will last. If your spouse has health insurance, consider becoming a dependent on their insurance. If your spouse doesn’t have insurance, take a look at alternative health care plans available in your state quickly, as medical care can be pricey and there may be penalties for forgoing medical protection. And, if possible, resist the desire to cash in on your 401(k) for as long as possible. Doing so will increase taxes and penalties and may leave you without a safety net later on.
Don’t Go At it Alone
Not sure what to do? Try speaking with a professional. If you don’t think you will have money to hire someone, consider getting advice from your local debt attorney or financial planner (many provide free consultations). They can help you negotiate bills, settle debts, and stay calm while navigating the challenging waters of unemployment.
You might also ask for recommendations at your local career center, which often have courses or resources on financial management.
And don’t forget your community. Whether it’s loved ones, friends, a religious organization, or others, make sure you are talking to someone about what you are thinking and feeling. Not sure who to call? Check out 211.org to locate resources in your community.