Most of the important steps you need to take to handle a job loss happen before you lose your job. Here are those steps.
A few years ago, I was let go from my full-time job.
It had nothing to do with me; the company was in shambles and needed to cut payroll in a big way. They ended up letting go most of the people involved in education and marketing, some 150 people in all.
It was devastating, of course, made only better by three facts:
- I had seen it coming.
- It was a relief to be done with a company that best resembled a three-ring circus.
- I was prepared for it.
Can you say that last point about your situation right now? Are you prepared to lose your job today, or soon?
It may not be such a hypothetical (though I’m not saying anything about you in particular; I’m sure you’re great). With the Fed raising interest rates in a big way (3% this year alone, up from effectively 0%), they are more or less saying that they are looking to increase unemployment.
This isn’t because they’re mean, but because, in our hyper-capitalist system, the tools we have are blunt. When prices start to rise too fast, that becomes a problem as things become too expensive for all but the most moneyed folks to afford.
In this case, all that we can really do is raise interest rates, which makes the cost of borrowing more expensive, and slows the economy down. And in a slowed-down economy, businesses don’t grow as fast, and some may start to spend less. And when that happens—boom!—lost jobs.
My point being, we may be in for a bit of that coming up. And your name may be on the list.
Of course, lost jobs happens all the time in any economy. So even if we’re not heading toward a recession, your name may still be on the list.
Either way, are you prepared?
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What does it mean to be prepared?
Being ready to lose your job involves thinking in two different realms:
The financial side means knowing how you’re going to continue to live once the money stops rolling in.
The emotional side means how to process and handle the loss internally, how your frame the loss, and how to manage the identity alterations that go along with a job loss.
You will need to do work in both realms. Unfortunately, there’s no way to avoid that.
Have an emergency fund
If ever there were an emergency worthy of the name, this is it. When you lose a job, for many people, you are losing 100% of your income.
That income has to be replaced, immediately. So the most important task for you right now is to make sure that you have an emergency fund.
I recommend an amount equal to six months of your spending.
That doesn’t mean six months of your current income (thought it could). It’s usually less than that, because when you’re in an emergency, you’re likely to be paring down your expenses (or you probably should). So if you’re spending, say 80% of your income, then you need 80% of your income, times six.
If your take home pay is $4,000 a month, and you can live on $3,000 a month, then you need $18,000 in savings.
I say six months because that’s a reasonable amount of time it would take you to get another job, and maybe a little more, so that keeps the lights on and the credit cards away while you figure out your next move. The less you have, the more urgent a crisis you may be in.
Know your nonessential bills
Your emergency fund will go farther if you spend less each month. So now is the time to determine what you’d get rid of if you had to pare down your spending.
Specifically, I’d look at your bills to start. Is there anything that you could (temporarily) live without, at least until you get a new job? Streaming services? Amazon Prime?
Then, if you’re doing things the way I suggest, and tracking your expenses, and giving yourself category targets each month, how much could you reduce your spending targets, and in what areas?
Over the course of my time in unemployment, I found that I could reduce my spending by about $800 a month, which is almost $5,000 in six months. That made my emergency fund last much longer.
Sign up for unemployment insurance
We’re assuming you weren’t fired for cause. As such, you are most likely eligible for unemployment insurance.
Sign up for unemployment insurance with your state office as soon as you are let go. It may take some time to get the process rolling (and in my case, there were some delays in processing that made it take a few weeks extra). This is not a well-funded part of the government, as it involves what many feel are “undeserving” entitlements.
But they’re wrong. Companies pay into this, and it’s a cornerstone of a functioning economy, and you are very deserving. Do not feel bad about asking for what is rightfully yours. You are not somehow less of an honorable person because you take unemployment insurance.
This isn’t something you can do in advance, but rather something you do as soon as the layoff happens.
Be prepared to experience grief
Even if you hated your job, even if you are so happy to be done with it, you will probably experience some grief. And so it’s important to be ready for that too, including all of its component stages.
The thing about grief is that it can’t be rushed. It won’t last forever, but you have to let it take its course. So the sooner you accept that there will be some form of grief, the less surprised you are when you feel it.
Get started today
I hope you never lose your job, which is definitely one of the most stressful situations you’ll ever experience.
But it’s likely to happen. According to one survey, 40% of Americans have been laid off or terminated at some point in their lives.
So get ready now. You’ll be glad you did.