When you lose your job, the key is don't panic. First of all, your financial affairs are still in your control. The following nine guides will help you hold onto what resources you have and survive this financial crisis.
Guide 1: Talk to your family about the situation. Let family members know what decisions must be made. Talk about what is important and what is not so important.
Talking with each other helps the family share concerns. If they understand what choices are available and what actions are necessary, they will be more willing to help. Don't forget to listen to what other family members are saying and feeling. Remember, your whole family probably is upset. But each member can help the family make it through these rough times.
Guide 2: File for unemployment benefits. Take your social security card and go to the unemployment office or location nearest your home as soon as possible. They will help you file your claim. If there is a waiting period between the time you apply for unemployment benefits and the time your check begins, you may be eligible for public assistance. Also, if you are not eligible for unemployment benefits or if your unemployment benefits run out before you find another job, you may be able to get public assistance.
Guide 3: Evaluate the ways your family uses money. Many times people buy things, not because they need the things, but because they want to spend money. Now is the time to tighten the purse strings and eliminate needless spending. Do you see yourself in any of the following examples?
- Do you have a "get even" philosophy? In other words, do you feel you deserve to buy something for yourself just because someone else gets something new?
- Do you buy things you don't really need now because you think, "tomorrow it may cost even more?" Or because "we might be even less able to afford it later?"
- Do you use money to bribe or reward others? Or do you withhold money as punishment?
- Do you spend money as a way to work off frustration or to relieve boredom or anxiety?
Now is the time to abandon these self-defeating spending habits! One of the most difficult things about being unemployed is to realize you cannot spend the way you did before. Pretending to yourself and to others that nothing has changed will not make things easier. Spending less is a must.
Talk about what your family really needs and what they would like to have. Put off buying what you would like to have but do not need now.
All fixed expenses, such as rent or mortgage payments, installment payments, insurance premiums, and other payments due on a specific date must be paid. Cutting out waste and unnecessary purchases can reduce other expenses, such as for food, clothing, and recreation.
Guide 4: Take a financial inventory. Look at what your family now owns. A few minutes spent calculating your family's net worth just might boost your spirits. Add up the total value of all your belongings and subtract from that total the amount you owe. Remember to figure the value of everything at today's market prices, not the price you paid for it. In other words, how much could you sell it for?
Guide 5: Find ways you can cut corners. To do this, you must know exactly how much money you have coming in and going out each month. Use all your check stubs and receipts to list your fixed expenses (housing, insurance premiums, taxes, installment payments, and other debts). Then estimate what you spend on food, clothes, school, gifts, and other expenses. You may find that you don't have a clear picture of where the money is going. If that is the case, try the following plan:
- Cut down on your spending.
- Make a list before going shopping and weigh the importance of each item before buying.
- Write down everything you spend money on for two to four weeks.
- Reduce the number of shopping trips you make.
- Plan ahead for big bills, such as insurance payments.
- Agree with your family that every purchase over a certain amount, say $50 or $100 will be brought to the family for discussion before buying.
Guide 6: Talk to the people you owe money to. Don't ignore bills or you may lose what you already have. Immediately contact your creditors: the finance company, bank, credit union, and department stores. Make an appointment to explain your problem. Here are some solutions you and your creditors might work out:
- Make smaller payments that you can afford for a short period of time.
- Refinance your loan. You can make another contract for smaller payments over a longer period of time. The new payments will be smaller, but the overall cost for the loan will be larger.
If all else fails, consider a consolidation loan. You can take out one loan to pay off all your bills at once. Then you will have just one debt to pay off to just one creditor. Each payment will be smaller, but you will commit yourself for a longer period of time, usually at a higher total cost.
Don't forget to work out a way to handle your monthly mortgage payments. If they are too high for you to pay, go to your lender and explain. Ask the officer in the mortgage-lending department to permit you to pay only the interest for a certain period of time. Or perhaps you can postpone one or two payments until you have pulled yourself out of your financial crises.
The important thing is that you talk with your creditors about your problem and come to an agreement about what you can do and keep from losing what you have.
Guide 7: Examine your insurance policies. Chances are that you were insured under your former employer's group health plan. If you were, the Comprehensive Omnibus Budget Resolution Act (COBRA) of 1985 provides you the opportunity to continue group health insurance for up to 18 months after you have been laid off. You will need to apply for this. You will have to pay the premiums but you have 18 months to find other insurance. If your former employer provided you with group accident and life insurance you will probably have a 30-day period from the day you left the company to reapply for an individual policy with the same insurance company without having a medical examination. The premiums for an individual policy will probably be higher than the premiums you paid for the group policy. But you need insurance now perhaps more than ever.
In many life insurance contracts there is a so-called automatic premium loan clause. This clause says the company will use your dividends to pay your premiums or will deduct the premium payments from the cash value of your policy. Check your permanent life insurance policies or call your agent as soon as possible to see if you have this clause.
Guide 8: When you need cash, you may need to decide whether to withdraw some of your savings or to make a loan. What you decide will depend on your individual circumstances, but there are disadvantages either way.
- When you take money from your savings account, it will no longer earn interest.
- If you take out a loan, you will pay interest for using someone else's money.
One solution might be a passbook loan that is a loan against your savings. You'll lose interest on your savings account and pay 1-1/2 to 2 percent interest in addition, but the total cost might be less than the interest charged for another type of loan.
If you decide to withdraw money from your savings account, take the money from a regular account first and leave any certificates of deposit untouched. You'll lose interest (early withdrawal penalty) on the certificates if you cash them in before they mature.
In any case, think very carefully about taking on additional debt while you're unemployed.
Guide 9: If you find you need outside help, turn to social agencies. Several programs, such as Food Stamps and Medicaid, are available for families needing financial aid.
Contact the Department of Children and Families' Food Stamp Office of to find out if you are eligible. Your family's resources and family income determine eligibility.
When you apply for the Food Stamp Program, take with you your rent receipts or housing payment book, utility bills, proof of medical bills (doctor, hospital, etc.), and proof of income for all working members of your household, including all benefits such as Social Security and public assistance, bank books, or any papers showing what you have in savings.
Summary
Remember, if you lose your job for whatever reason:
- Don't panic. You can still control your financial situation, if you plan carefully.
- Communicate. Analyze what is important and, as a family, decide on a plan of action.
- File a claim for unemployment insurance right away. You may be eligible for assistance or Food Stamps, as well.
- Don't default on payments. Go to your creditors, explain your situation, and work with them to make adjustments.
- Be prepared to change your standard of living, at least temporarily, so you don't have to give up essentials.
