Lost Your Job? 6 Things to Do Immediately
A lot of recent headlines are playing up the fact that the unemployment rate dipped below 5% for the first time in eight years, which is certainly a positive sign for U.S. workers. But look a little closer and it's evident that plenty of Americans are still hurting.
According to the Department of Labor, the four-week moving average of new unemployment claims has been on the rise since October. For those who suddenly find themselves without work, it can be a scary time. But rather than succumbing to fear after a job loss, it's important to take a deep breath and reassess your needs. By taking a systematic approach to your financial matters, you'll avoid making things any tougher than they already are. Do these six things first.1. File for Unemployment
You may be losing your normal salary, but state unemployment benefits can help soften the blow. If you were terminated involuntarily and worked enough hours, you're eligible for up to 26 weeks of compensation in most states. The key is enrolling as soon as you can after you vacate your position – that way you'll avoid any unnecessary gaps in your income. Depending on where you live, you may be able to conveniently file by telephone or over the Internet. (For more, see How Unemployment Benefits Work.)2. Assess Your Severance Package
If you're fortunate enough to receive a severance package from your employer, it can be tempting to accept it right away. But the reality is that there's often some room for negotiating, which can lead to a much better outcome.
In addition to dollars and cents, pay attention to any rights the company may be asking you to forgo when you walk out the door. Is there a non-compete clause that prohibits you from getting other jobs within the industry? If so, it's probably worth talking to an employment attorney who can advise you on your options.3. Get Health Coverage
Living on a reduced income is hard enough, but if you experience health problems and don't have insurance, it can be devastating financially. On top of that you may face a tax penalty if you're not covered for all or part of the year.
When you lose a job, the best option for many people is to sign up for coverage under your spouse's employer plan. If that's not an option or seems unusually expensive, a federal law known as COBRA allows you to continue under your old employer's plan for at least 18 months. You'll get a group rate this way, although the company typically won't pay its former share of the premium.
Individual coverage under your state's health insurance exchange is another option to explore. Can You Use a Healthcare Exchange After Open Enrollment? Yes, you can, because the loss of a job is considered a qualifying life event. This lets you take advantage of a special open-enrollment period. When you apply you'll be able to see if you qualify for subsidies based on your income. The marketplace will also tell you if you meet the criteria for Medicaid or the Children's Health Insurance Program (CHIP).4. Roll Over Your 401(k)
If you like the investment options in your company's 401(k), you can keep your money there, but you'll typically have a lot more choice if you put it into a rollover IRA that offers low-cost funds. Should you go down that road, consider doing a direct transfer of funds into your new IRA. You can also do an indirect rollover, in which your old employer liquidates your account and cuts you a check. However, your former employer is legally required to withhold 20% of it for income tax purposes (in case you decide to pocket the money). You're usually better off doing it the other way. (For more, see 401(k): Pressure's on to Leave It at Your Old Job.)5. Don't Forget About Stock Options
If you were an executive or a member of the management team, you may have received stock options as part of your compensation package. When you leave the company, those options are typically good for no more than 90 days. So if you have an option to buy a set amount of stock for less than the company's shares are currently selling on the market, you'll want to exercise it before it expires. Otherwise you're leaving free money with your old boss.6. Make Do with Less
Sometimes the simplest piece of advice is the one that's most important. That's the case when it comes to keeping a strict budget following a job loss. Getting into a pattern of unnecessary borrowing will only exacerbate your money worries. Look for any extraneous expenses you can cut, whether it's the coffee shop latte you're used to getting every morning or the premium cable package that you don't really need.The Bottom Line
Losing a job can make it difficult to think clearly. While you're figuring out what to do next, take these steps to shore up your finances. Settling these immediate issues will make it easier to focus on the task ahead: figuring out where to go from here.