When you go through life, you can always expect the unexpected. It is common for life to take an immediate and unexpected turn. It can be birth, death, move, marriage or change in income. In all of these cases, it is important to assess the finances of your household and decide how to make the best progress. In the event of an unexpected job loss, you have five options to re-evaluate your finances to get you on the best path.
Start (or update) your budget
Hopefully you already have a budget, but if not, now is the perfect time to do it create a budget. The word "budget" has a negative connotation for many people, but it doesn't have to. A budget is just a tool and, like all tools, can be used for good or for bad. Start tracking your monthly expenses and compare them to the amount of income you receive. This income can come from severance pay, unemployment benefits or part-time work. It's pretty easy to set up a budget in the Mint app and check where your money is actually going.
Reduce unnecessary costs (be brutal)
The 50/30/20 rule is a popular budgeting rule that says that 50% of your income should be spent on essentials (needs), 30% on wishes and 20% on savings. The closer you get to this rule, the less changes you have to make to your budget after an unexpected job loss. If you are in a two-income household where a household member has just lost his or her job, you may find that you can only earn 50% of the income.
Now is the time to review your recurring expenses and see how you can possibly do so Simplify your finances. Be brutal – depending on how much money you have, you may have to get rid of most or all of the non-essential expenses until you have a new job and income.
Stop saving and tap your emergency fund
Saving for a rainy day is important and have an emergency fund is one of the most important principles for a solid financial foundation. You know what? An unexpected job loss is the rainy day you saved up for! One of the first steps in re-evaluating your finances after an unexpected job loss is to stop all nonessential emergency or retirement contributions. You can resume them at any time when you are on your feet again.
You can also stop contributing to your emergency fund. Now is the time to pull out of the emergency fund if needed. In a situation where you suddenly lose income, it is normal not to live under your means. The best thing you can do in this situation is to minimize your shortfall every month. Calculate how much money you lose each month when you have no income and determine how many months your emergency fund will last for you.
Of course, if you've just been hit by an unexpected job loss and don't have an emergency fund to help you deal with it, it's not a good thing to tell you now. The preparation time is BEFORE the unexpected. If you are reading this article and you are in a good financial situation, make sure you are preparing for an unexpected job loss or other financial disaster.
Know Your Benefits (and When They Expire)
If you are faced with an unexpected job loss, you are probably entitled to certain benefits. Depending on your employment situation, you may have received a severance package. You may also be eligible for medical care from your previous employer or government agency. You should make sure that you claim your unemployment benefit if you are also entitled to it. Take a look at all these benefits and find out how much they are worth and, above all, how long they are good.
Look for part-time or gig work
There are only two ways to make up for a monthly shortfall. You can either cut expenses or increase income. Reducing expenses is a good first step, but there are only so many gym or ice cappuccino memberships that you can remove before you start cutting pretty deep. Once you have reached this point, you want to focus your time and effort on increasing your income.
You want to put most of your effort into finding a new job in your field. No part-time work or part-time work will compensate you and you cannot work full-time in your field of study again. But in the meantime are here a few ways to make extra money quickly::
Sell additional possessions that you no longer use or need
Join the gig economy (Uber, Lyft, Doordash, Airbnb, etc.)
Focus on a Side hype
Hopefully, these suggestions will help you reevaluate your finances after an unexpected job loss and survive until you can get back on your feet.
Dan Miller (19 posts)
Dan Miller is a freelance writer and founder of PointsWithACrew.com, a website that helps families travel for free / cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 children.