Dealing with Unemployment
You’re called into your boss’s office and told your position has been eliminated due to budget issues. Or, you’re told your contract will not be renewed once it’s up. In either case, you’re facing a job loss. Here are some strategies to come up on top.
If you’re told a few months ahead of time, you have time to prepare. If you own a home and have equity in it, you should look into a home equity line of credit. Mary Ellen was told in late February that her position would be eliminated at the end of her contract (which was late August). She had about six months to prepare.
Mary Ellen and her husband had enough equity in their house (what the current value of the house is minus what they owed on their mortgage) to get a $75,000 home equity line of credit. This allowed them to pay off all credit cards, car loans, and other outstanding debts. The home equity loan cost them about $300 a month, but saved them about $2000 a month in car and credit card payments. This $1700 monthly savings allowed them to survive her unemployment period and saved them the stress that would have occurred had they not done the line of credit.
Depending on your credit and current market conditions, lines of credit usually have good interest rates of 7% or so and many times the interest on them is tax deductible (this depends on several factors so talk to your tax advisor or accountant first). Remember, though, that you are putting your house on the line if you can’t make the line of credit payments so this shouldn’t be taken lightly – make sure you can make that monthly payment! You should also get a line of credit with as low an interest rate as possible and low fees (no closing costs, etc.). Find a line of credit where the variable interest rate can be converted to a fixed interest rate in case you need to do so in the future (like if interest rates start climbing).
To qualify for the loan, Mary Ellen and her husband needed both of their incomes. That’s why, if you are expecting a job loss or it’s a possibility, get that line of credit set up before you are unemployed. You don’t need to use the line of credit until you need it. You probably won’t qualify once one of you is jobless.
You may be able to collect unemployment insurance through your state after your job ends. Check out the internet for specific information on unemployment claims and unemployment benefits. If your eligible for unemployment the only thing you have to do is apply for unemployment. You can file for unemployment online in some cases. There may be an unemployment office near you. The money won’t replace your salary, but it will definitely help to bridge the gap. Make sure you check out all the rules and regulations about collecting unemployment so you fully understand your responsibilities.
You should try to lower all of your monthly obligations. You can often get out of a cell phone contract if you call up, ask to talk to a manager, and explain that you’ve lost your job and can no longer afford to pay on the contract. My wife got out of her contract without paying anything by doing this. I was able to save hundreds on our car insurance by switching to an online car insurance company. Look around and see what’s out there – all these companies are competing for business now. Cancel any subscriptions you can (some services you may have signed up for may be able to be cancelled if you call and cancel them). A great way to do this is to take each bill as it comes in and see how it can be lowered or cancelled. You should also check out each credit card statement that arrives to see if you are being charged monthly for something you signed up for but forgot about or can do without.
You can save on electric by unplugging anything not in use (anything plugged in is using electricity – even if it’s not “ON”). Cut way back on use of your dryer. An electric dryer uses a huge amount of electricity whereas lights are pretty cheap. So, you can put your clothes in the dryer for a few minutes to get the lint off them, and then hang items on plastic coat hangers (hung on your shower rod) or hang on a wooden clothes rack (or two).
You likely won’t need any childcare or daycare if you’re unemployed, so that’s a savings. The purchase of clothes and groceries can really be cut back. Only buy clothes when they need to be replaced, and plan meals and bring a list to the grocery store. You can save hundreds this way. Additionally, if you make soups and casseroles you’ll save money on groceries. They are far cheaper to make and go farther than normal meals. Check out some of the frugal websites on the internet for lots of ideas about saving money.
Finally, brush up your resume (or you may need to create a new one if it has been a while) so you're ready to look for a new job. You can check out the resume writing section of the site for more information on how to do this.
A job loss can be upsetting, but how you respond to it is most important. You can rise to the challenge, use your brains and skills to improve your situation, and find a new and better job for the future. Best of luck to you.