Unfortunately, most Americans aren’t financially prepared for unexpected job loss. 30 percent of adults wouldn’t even be able to cover a $400 emergency expense without borrowing money or selling belongings, let alone survive for months without income. If you’ve recently lost your job, there are several steps you should take to ensure your financial situation doesn’t get any worse. Joblessness can be difficult to navigate, but with some effort and patience, you can find employment again. In the meantime, here’s what you should do.
File for Unemployment
Unemployment insurance provides a portion of your previous wages to tide you over while you look for a new job. To be eligible, you generally need to have lost your job through no fault of your own. You also need to have worked long enough and earned enough money prior to filing (requirements vary by state).
The CARES Act provided states with enormous flexibility to expand eligibility. For example, independent contractors are now eligible for unemployment in most states. Unemployment is also available to people who are temporarily unemployed due to shutdowns, quarantine, or needing to avoid exposure or care for a family member.
The amount you’ll receive each week will depend on what you were paid when you were employed, but applicants are currently eligible for an additional $300 per week on top of what they would normally qualify for.
As soon as you become unemployed, you should file an unemployment claim with your state’s unemployment insurance program in the state where you were employed. You’ll need to provide information about your past employment, and it typically takes two to three weeks to receive your first check.
Pursue Health Insurance Options
A lapse in health insurance coverage can be financially devastating if something were to happen to you while you were without coverage. When you lose your job, you also lose your employer-sponsored healthcare coverage. However, you have a few options for temporary coverage until you find a new job.
COBRA
Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), workers can temporarily extend the same health insurance coverage they were receiving under their group health insurance plan through their employer. Your employer must provide you with the paperwork to apply for COBRA, but you’ll be responsible for the full cost of your policy, including the portion your employer previously paid, if any.
Medicaid
If you have no income, you may qualify for your state’s Medicaid program, which provides free or low-cost coverage to low-income people. In most states, you’ll be eligible even if you’re receiving unemployment benefits.
Marketplace Plan
If you’re not eligible for Medicaid, you still may qualify for premium tax credits with a marketplace plan, which can make this option a lot less costly than applying for COBRA. Check out your state’s health insurance marketplace to see what options are available to you.
Join Your Spouse’s Plan
If you’re married and able to get coverage through your spouse’s employer-sponsored plan, this might be your best option, especially if you’re not eligible for Medicaid due to your spouse’s income.
Initiate a Spending Freeze
There’s no telling how long you’ll be unemployed, so you need to preserve your savings as much as possible. That means cutting out all discretionary spending, which includes things like dining out, entertainment, and alcohol. Reevaluate your budget and see if there are subscriptions you can cancel, and look for ways to save money on essentials as well. For example, you may need to opt for less expensive proteins at the grocery store. Devote any windfalls, such as your most recent economic impact payment, to your savings account or put the money towards necessary expenses like rent.
Pick Up a Side Hustle
While you’re looking for a new full-time job, try to pick up a part-time or contract role. There are plenty of freelance platforms for people to find temporary projects that pay. Whether you were an accountant, a designer, or a web developer, you may be able to find freelance projects to tide you over. People who worked in the service industry may find it fitting to work as independent contractors for delivery services. There are also several online platforms that allow you to pick up some extra cash from doing things like taking surveys or watching videos. These endeavors are not a replacement for a job, but they may help bridge a gap in income.
Work on Your Resume
If it’s been a while since you applied for a job, your resume probably needs refreshing. You may need to remove old entry-level positions that are no longer relevant, add skills or new credentials that you acquired during your previous role, and make sure you include the important keywords employers in your industry will be looking for.
Unemployment can also be a good opportunity to take a class or get a certification to add to your resume, which can make you stand out to potential employers.
Set Up a Schedule
During times of stress, it’s especially crucial to your health to keep a routine. Going from full-time employment to hours of free time can feel jarring, but there are plenty of healthy activities you can include in your schedule. You might start your day with exercise, spend the morning looking for jobs, schedule an hour or two to read up on current trends in your industry, study for a credential you’re pursuing, spend time networking, or work on a creative project that is meaningful to you.
Apply for New Jobs
Ask your business network if they know of any job openings, and use job search websites to narrow down your options. Give yourself a goal for each day — you may need to apply to dozens of jobs before you find the right company, so it’s a good idea to apply to several each day in the beginning. Just make sure each cover letter is tailored to the company you’re applying for.
Sell Belongings
If you need some cash while you’re waiting for your next job offer, selling items on an online marketplace or at a garage sale can be a great way to rake in some extra money. You should avoid pawn shop loans, however, which come with sky-high interest rates.
Borrow Money If You Need It
Most lenders require proof of income, so you’ll have a much easier time getting a loan if you can show earnings from side hustles or unemployment benefits. But there are no-income loan options available as well.
Friends & Family
If you have friends or family with the means to lend you money, this will be your best option, even if you find it difficult to ask for help. You can arrange to repay the money once you find a job, so you won’t be left with no income and unaffordable loan payments. If you want to make things official, you can draw up a contract and agree on an interest rate.
Even if your friends and family don’t have extra money to lend you, they may be able to help if they have good credit and stable income. They can cosign on a credit card for you, which you can use to cover necessities until you find a job. You’ll still need to make the minimum payments, but you’ll be able to carry a balance as well. Just remember that any missed payments will affect your co-signer’s credit as well.
Early Withdrawal from Retirement Account
In most cases, withdrawing from your retirement account before age 59 ½ results in a 10 percent tax penalty in addition to any income tax you’ll have to pay on your distribution. Experts generally don’t recommend this unless you’re out of options, because you’ll lose out on the opportunity for your money to grow, which can interfere with your retirement plans. In some cases, you may be able to avoid the penalty. For example, if you live in a major disaster area or need the money for medical bills or health insurance premiums, you may be eligible to withdraw without losing 10 percent.
Home Equity Line of Credit (HELOC)
With this type of revolving credit, you tap the equity in your home as needed. You can continue to borrow throughout the draw period, which is typically ten years, so you’ll likely find a job before you need to repay any of the money. Once the draw period ends, you’ll start making monthly payments. Since an HELOC is secured by your home, you’ll be more likely to qualify with limited income. However, you could also lose your home if you default.
Auto Equity Loan
An auto equity loan is a lump sum loan secured by the equity you have in your vehicle, which you can get even if you’re still making car payments. You’ll typically need some income to qualify. But like an HELOC, an auto equity loan is secured, which means it’s much easier to get approved. The downside, of course, is that you could face repossession if you can’t afford to pay the loan. For that reason, you should only take out an auto equity loan if you have income from another source like a side hustle.
Take Advantage of Other Relief Options
If there are eviction and foreclosure moratoriums in your state currently due to the coronavirus crisis, you may choose to fall behind on your payments and divert any income or savings towards necessities like food. If you’re still struggling to put food on the table, consider applying for your state’s Supplemental Nutrition Assistance Program (SNAP) or researching local food pantries where you can pick up free groceries. And if you can’t afford to pay your utility bills, look into the Low Income Home Energy Assistance Program (LHEAP). You can also use the benefit finder to find which programs you may qualify for and learn how to apply.
Rebuild Your Emergency Fund
Even with your limited income from side hustles or unemployment benefits, you should do your best to squirrel away as much as you can. And when you are offered full-time employment, evaluate your budget to determine how much you can safely set aside, and then make a plan to pay yourself first. A good goal is to save 20 percent of your income, which includes contributions to retirement accounts and your cash emergency fund. You can set up automatic deposits into a high-yield savings account each month, so you’ll be prepared should you or your spouse face job loss again in the future.
The information contained herein is provided for free and is to be used for educational and informational purposes only. Consult a financial professional for specific help with your situation.