What to Do About Your Finances When You Become Unemployed

You’re unemployed, or soon to be: What to do now about your finances.

The unthinkable happened. As a professional in the new millennium, you went to sleep at night knowing that as awful a day at work or your boss might be, you still had a job to go to the next day.

Today, that’s not true for you and perhaps many of your friends or colleagues. With the “new economy” mired in quicksand, and unemployment at record levels, once productive workers, from virtually every field, are now trying to reconcile with a range of emotions, from shock and disbelief, to gut wrenching panic, anger and bitter resentment. Here are some thoughts to keep in mind regarding your finances, while you focus on landing that new job.

First, keep in mind you actually do have a job now, and that job is looking for full time gainful employment. Just as in finance, where the new perk is not the year-end bonus, but the job itself, looking for work is a full time job. Think of it as the trial version before you accept the full download.

Second, now is the time, more than ever, to carefully review your finances. I am not simply referring to your checking account balance, but substantially more. There are a number of items on the to-do list that need to be updated, compared, and if necessary, modified or changed outright. Remember frugal is the new black. The list includes, but is not limited to:

a. Reviewing your monthly outflow which is the approximate sum of all your monthly living expenses. Round up the numbers and use your monthly average going back a few months for quarterly bills.

b. Keeping an adequate balance, if possible, in checking and savings accounts to cover the monthly outflow for a least several months.

c. Review the cost and coverage of your home, auto and life insurance policies. Make sure your homeowners’ is covering the house and the contents, and not the dirt the house sits on.

d. Can you scale back certain expenses? Take a pad and draw a line down the middle. Label one column “need” and the other “want”. Be judicious and think like a cheapskate.

e. Review your investment and retirement accounts very carefully. This is perhaps the one place you want to spend a little extra time. If you have left your company, review the most recent monthly statement of your 401k to make sure you know what you own, how it is performing, and that you are not loaded up with more than a prudent amount of company stock. We have all heard the horror stories of potentially stuffing too much company stock in your 401k or other retirement accounts.

f. If you are unsure or uncomfortable with performing your own retirement account analysis, consult with a financial professional for a second or even third opinion. Ask to have each of your holdings reviewed and what the impact might be, either positive or negative. Also make certain to ask how your retirement account matches your comfort level regarding risk tolerance and whether or not it also reflects your non- retirement accounts.

g. Finally, determine what is an acceptable amount of potential compensation when that new job offers comes through. It may be for substantially less than you previously earned. Remember, the new job may be employment, but you may not be able to afford it. It’s tempting to jump at an offer, but take a few days to truly consider whether it get’s you back on the same track you were on.

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