Job loss can be stressful because you have to cope with sudden income loss. This may result in depression and anxiety. However, you can always find ways to take charge of your money and control your budget until you get back on your feet. This article helps you learn how to manage your finances after losing your job.
1. Take advantage of unemployment benefits
Unemployment benefits offer temporary income after losing your job through no fault of yours and are paid by the state. This money is meant to be an income source for the jobless until they can find new jobs. To qualify for unemployment benefits, you must meet specific criteria, including age, medical, residency, and financial requirements.
For instance, if you’re living with a severe mental and physical disability that notably hinders your ability to earn a living, you may be eligible for the Assured Income for the Severely Handicapped (AISH), which covers expenses related to health, personal needs, lodging, and child care. Unemployment benefits provide partial earnings replacement for a predetermined period or until you can find work, whichever comes first. Do some research to determine the unemployment benefits you qualify for and apply.
2. Adjust your budget
Job loss calls for significant financial adjustments. While cutting your expenses here and there might seem easier, taking your time to formally modify your budget is wiser. When creating your budget, assess your income and compute the fixed expenses (the mandatory bills you must pay monthly), including mortgage or rent payments, insurance premiums, car payments, utilities, and more.
Subtract these from your income and budget the remaining amount for flexible expenses and savings. List the non-essentials you spend every month and cut back on them based on how much you have to spare. Consider sticking to the new budget until your finances improve.
3. Ensure you have sufficient health coverage
After a job loss, you may lose insurance, especially if yours was company-provided. Replacing your medical plan immediately can help ensure healthcare costs are covered. Weigh your health insurance options and choose the most suitable. You can access medical care via your parents’ plan based on your age. If you’re married, a spouse’s plan would be ideal.
You may keep getting medical insurance via your previous employer through Consolidated Omnibus Budget Reconciliation Act (COBRA). However, this could be expensive because your former employer paid part of it when you were working, and now you have to pay the entire premium plus an administrative fee. If you can’t cope with this, find affordable insurance options.
4. Find supplementary income
While most of your time might be focused on finding new employment after a job loss, you can productively utilize your free time looking for an extra source of income. Provided you have the necessary skill set, you can find freelance opportunities, monetize your expertise by developing online resources through videos and blogs or get a part-time consulting job. This will help offset your bills while positively impacting your self-esteem and mental health.
5. Turn to your emergency fund
Building an emergency fund is essential for sound financial health. If you’ve diligently kept funds aside for contingencies, now is the time to utilize them. You can invest part of them to generate income and use the rest to cover your expenses.
Job loss can be financially and mentally distressing. However, a sound financial plan and good money management habits can help you navigate these challenging times smoothly.