Whether it’s a job loss, layoff, or furlough, the quicker you start making changes, the better. Acting quickly ensures you can continue meeting today’s expenses without accruing further debt and will allow you to keep on-track for your retirement goals.
Get your mindset right.
Even if the loss seems insignificant at first- a 10% pay cut or reduction in 401(k) matching - it can be just as damaging to your finances. As soon as you find out you will be experiencing a reduction in your income, start thinking about how you can spend less.
- Even if the loss seems insignificant at first- a 10% pay cut or reduction in 401(k) matching - it can be just as damaging to your finances. As soon as you find out you will be experiencing a reduction in your income, start thinking about how you can spend less.
Cut your spending.
- Eat out less and buy fewer prepackaged items.
- Cut streaming services or subscriptions.
- Figure out if you can cut larger expenses in some way: Less insurance coverage because you might be driving less. Have a college student go part-time or take a gap year. See if you can cut the time your kids are in childcare.
- Pay the minimum on your debts, even if your goal was to be debt-free. Now is the time to preserve your immediate income, not try to get ahead.
- See if you qualify for loan delayment or forgiveness.
Evaluate health insurance. COBRA may not be the best option, despite being the easiest to sign up for. Do research into government-sponsored health insurance or a health-care sharing plan.
Look into emergency funds.
- Have you been paying a life insurance policy? Check into its cash value and consider cashing it out or borrowing against it.
- If you have a pension or 401(k), consider taking a loan from those funds. Remember that you must pay back your IRA or 401(k) by then end of 2022 if you don’t want to take a huge hit from having to pay taxes on that money.
Many of these tasks seem either overwhelming or like they won’t make much difference, but they are key to getting your time of unemployment off to the right start.
Next week, we’ll talk about tackling bigger expenses like healthcare and about tapping into emergency funds. Subscribe to our 6-part email series on job loss and minimizing the damage to your retirement so you don’t miss any key information.
We wish you luck on this next chapter. If you need help developing a customized plan for your situation, give us a call at 847- 520-5545.