Job loss basics
What to do if you lose your job
Losing your job can be disorienting. The average length of unemployment is almost 22 weeks, according to the Bureau of Labor Statistics, so it’s important to quickly adapt your finances to your new normal.
Here are some steps to help find your financial footing.
1 Unemployment
Contact your state’s unemployment office the day you lose your job. You can usually file an unemployment claim online. The process can take a few weeks, so don’t delay.
2 Savings
Take stock of your savings. Factor in severance or payouts for unused vacation days, which will help you stretch your reserves. Resist the urge to cash out a 401(k). Between taxes, penalties and lost retirement earnings, that’s an expensive move.
3 Budget
Switch to a bare-bones budget as soon as you lose your job, says Bruce McClary with the National Foundation for Credit Counseling.
Cut out gym memberships, ride shares, cable and streaming services. You can readjust your spending once you find employment.
4 Creditors
Contact lenders, utility companies and credit card issuers that you owe money. Some may let you lower or suspend payments.
Don’t forget student loans. You may be able to temporarily suspend repayment through deferment, or lower the amount due each month.
5 Prioritize
You may need to make some hard decisions. The top priority is paying rent, keeping the lights on and putting food on the table, says Scott Newhouse, a certified financial planner in Thousand Oaks, California.
Debt comes next. McClary says to prioritize collateralized loans, like your mortgage or auto loan, where you might lose that item if you do not pay. Continue to make at least the minimum payment on credit cards for as long as possible.
6 Health care
Often, you’ll have coverage at least until the end of the month, but you’ll need something to bridge the gap until your next gig.
Get on a partner’s, spouse’s or your parents’ plan (if you are under age 26). Job loss is considered a “qualifying event,” meaning you can get health insurance outside of the annual open enrollment period.
You can also search for a new plan through the health insurance marketplace. Or you can continue coverage through your former employer via COBRA insurance.
This article was provided to The Associated Press by the personal finance website NerdWallet. Want to suggest a personal finance topic that Quick Fix can address? Email apmoney@ap.org.