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How to Prepare Financially & Survive Unemployment or Job Loss – 9 Tips

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Many people are facing the prospect of unemployment or reduced hours right now, as the COVID-19 pandemic spreads around the globe and companies both big and small are shutting their doors or reducing staff.

A March 2020 poll by NPR found that 1 in 5 American households has lost work due to the pandemic. For people earning less than $50,000 annually, this figure is currently at 25%. CNN reports that up to half of all American jobs are at risk because of the pandemic. Everywhere, people are scrambling to find ways to save money on a tight budget and looking for side gigs to supplement lost wages.

If you’re worried you’re going to lose your job during the pandemic, it’s essential you start preparing for this possibility. The steps you take now can help reduce your stress and help you survive financially.

How to Prepare Your Finances for Job Loss

Most of the time, people don’t know in advance they’re going to lose their job. The news comes as a complete and unwelcome surprise. Fortunately, there are many steps you can take right now to prepare for the possibility of layoffs or a drastic reduction in your working hours.

1. Revise & Trim Your Budget

If you’re facing a job loss and don’t have a monthly budget for your household, make a household budget immediately. And if you devised your current budget based on your previous income, go through and analyze your expenses based on your new situation.

Trim whatever you can out of your spending. Some ideas to save money on a tight budget include:

  • Cancel cable and watch TV online. Streaming services like Disney+, Amazon Prime Video, Hulu, and Netflix are much cheaper alternatives.
  • Raise your car and home insurance deductibles to lower your monthly premium.
  • Cancel any subscriptions you have, which might include magazines, streaming, or subscription boxes. Use services like Truebill to find subscriptions you might have forgotten you’re paying.
  • Keep the air conditioning turned off or the heat turned down to save money on utilities.
  • Keep lights turned off to save money on your electric bill.

If you’re worried you’re going to be unable to pay for essential services such as electric, Internet, gas, or water during the current pandemic, call your provider and explain your situation. USA Today reports that many cities and private companies are halting service interruption due to nonpayment, waiving late fees, offering flexible payment plans, or even delaying payments altogether.

2. Build Your Emergency Fund

If you don’t currently have one, learn how to build an emergency fund by placing cash in a high-yield savings account from a bank like Simple.com. If you do have one, make sure you have enough to cover you and your family’s expenses for three to six months. Every dollar you cut out of your budget right now should go straight into your emergency fund if possible.

Chances are your life has changed significantly due to the pandemic, and if you’re like most people, you’re not doing many things you used to. While it can feel stressful or frustrating to give up these activities or purchases, these changes give you a chance to build your emergency fund further.

Stop and think about everything you used to do before the pandemic that you’re not doing now, and put those expenses into your emergency fund. For example:

  • Going out for an evening drink with colleagues
  • Going out to dinner
  • Attending concerts or sporting events
  • Taking a vacation
  • Shopping for clothes
  • Buying a latte before work

For example, if you’re currently working from home during the pandemic, it means you don’t have to spend money on gas each week to get to and from work. Start putting the money you usually spend weekly on gas into your emergency fund. Or if you used to spend $25 per week eating out for lunch with colleagues, put that money into your emergency fund.

Another option is to use your tax refund to build your emergency fund. Or you can use the stimulus check the federal government sends in response to the pandemic. According to CNBC, the federal government will be sending out $1,200 checks to most Americans within the next several weeks. If you don’t need this money to make a rent or mortgage payment or buy groceries, use it to jump-start your emergency fund.

3. Think About Health Insurance

According to the Kaiser Family Foundation, 49% of people in the United States receive health insurance from their employer. So what do you do if you lose your job?

First, if you have a severance package, read through the details carefully to see if you can sign up for COBRA, a group insurance plan offered by your employer if you’ve been laid off or experienced a reduction in hours.

You can also apply for coverage through the federal government’s health insurance marketplace. Job loss is a life change that qualifies you for special enrollment, so you can apply for coverage even if open enrollment has closed.

You could also qualify for Medicaid. Each state has different requirements based on income and family size. You can also switch to a cash-only doctor if one lives and works in your area. Many cash-only doctors offer their patients a flat monthly fee for unlimited health services, like patient visits or phone consultations. The monthly fee is largely dependent on your area and family size.

4. Pay Off Debt

Getting out of debt, especially high-interest debt, should be a top priority before you lose your job, and there are ways to get out of credit card debt fast. Do whatever you can to pay off your current debt or transfer high-interest debt to a lower-APR credit card. If you’re still employed, find ways to supplement your income now and earmark those extra funds to pay down your debt.

Another option is to contact your credit card company and explain your situation. The New York Times reports that some lenders are providing temporary hardship concessions such as allowing you to make interest-only payments, waiving interest payments entirely, or even suspending all payments for a set amount of time.

If you own a home and have good credit, you can apply for a home equity line of credit, or HELOC, before you lose your job, as it can be difficult or impossible to get one once you’re unemployed. You don’t have to use the funds immediately when you take out the loan, but this opens up cash you can use to pay down a higher-interest credit card or buy groceries.

According to U.S. News & World Report, paying off credit card debt with a HELOC can significantly reduce your interest payments. However, it also puts you at risk of losing your home if you default on payments, so weigh the pros and cons carefully before moving forward.

Some credit cards are currently offering long-term 0% APR, and transferring your current debt to these cards can save you a significant amount in interest. Just make sure you read the fine print and ensure the 0% interest rate is at least 12 months or longer before you go this route.


5. Get a Deferral on or Refinance Your Mortgage

Many people are anxious about their rent or mortgage payments during a layoff or reduction in hours. USA Today reports that Fannie May, Freddie Mac, and the Department of Housing and Urban Development are suspending evictions and foreclosures until at least the end of April due to the pandemic.

If you’ve lost your job or are experiencing a reduction in hours and can’t make your monthly payments, reach out to your lender immediately and let them know your current situation. You might qualify for mortgage deferral, which is when lenders suspend mortgage payments during extenuating circumstances.

Now may also be an excellent time to refinance your mortgage if current rates are lower than what you’re paying. Websites like Credible.com will allow you to receive quotes from multiple lenders in just minutes.

6. Apply for Unemployment Benefits

If you do lose your job, apply for unemployment benefits immediately. Note that each state runs its own unemployment program, so there’s no one-size-fits-all approach.

The Department of Labor’s Career One Stop is an easy way to learn more about the unemployment benefits in your state. Laws are also being updated to meet the needs of those affected by the pandemic. For example, you can now apply for unemployment benefits if:

  • Your employer temporarily ceases operations due to COVID-19
  • You’re quarantined after being exposed to the COVID-19 virus and you expect to return to work
  • You leave your job because you fear exposure to the virus or if you need to care for an ill family member

You can file for unemployment online or over the telephone. Make sure you have the necessary documentation organized beforehand to save time. The information you need varies by state, but could include:

  • Your Social Security number
  • Personal information such as address and telephone number
  • Your bank’s address and routing number and your checking account number
  • Your employer’s name, address, and phone number
  • Exact dates you were employed
  • Copies of recent pay stubs
  • Emails from your boss or corporate heads about layoffs or a reduction in hours

If you’re a freelancer or contract worker, you typically can’t apply for unemployment benefits. However, it doesn’t hurt to apply anyway, as some states are changing their mandates to include freelancers and contractors. If President Donald Trump declares a national disaster due to the pandemic, you will be eligible for unemployment benefits with Disaster Unemployment Assistance.

If you do have to apply for unemployment, you could face challenges finishing your application in some areas. NPR reports that due to a surge of applicants, many states’ unemployment websites are repeatedly crashing. Keep trying or consider applying during off-peak times, such as late at night, when fewer people are using the system.

7. Analyze Your Cellphone Usage

For most people, their cellphone is a nonnegotiable expense. And you’re definitely going to need a phone to look for job opportunities and stay in touch with family and friends. Fortunately, there are plenty of ways to save money on your cellphone bill.

One strategy to save money is to switch to a prepaid cellphone plan, which according to U.S. News & World Report can save you $30 or more each month. These carriers charge you for a preset number of minutes of data and still offer decent coverage around the country. Verizon, AT&T, Cricket, Straight Talk, and Boost Mobile all offer prepaid plans. Check out Consumer Report’s analysis of the best low-cost cellphone plans to save even more.

It’s also important to look at your data usage. If you often have to pay data overage fees, it can be worth the expense to up your data limits to avoid these hefty charges. However, if you’re willing to stop using cell data for web surfing and use Wi-Fi instead, lowering your data limits is an effective way to reduce your monthly bill. You could even choose to move to Ting, where you’ll only pay for the talk, text, and data you actually use each month.

Fortunately, most carriers are suspending penalties, late fees, and service cutoffs due to the pandemic, while others are offering all users unlimited minutes or data to stay connected. Visit your carrier’s website to see how they’re helping customers affected by the pandemic.

8. Start Networking

Everyone’s situation is different. Many people are going to refresh their resume and try and find a new job as soon as possible. Others may decide to be a stay-at-home parent for a while or improve their career skills during quarantine.

Whatever your plans are, make sure to put your network of friends and colleagues to use, especially when you start looking for a new job. Use Facebook and your LinkedIn profile for business networking. They can be invaluable sources for finding new opportunities.

9. Find New Sources of Income

The current pandemic is affecting every industry, and hiring has slowed or even stopped entirely in many companies. However, there are still companies hiring during the pandemic, and there are still opportunities to find new income streams.

One strategy is to switch careers entirely and move to a recession-proof industry like medicine, law enforcement, or senior care. Some sectors people don’t typically see as recession-proof are also hiring during the current pandemic. For example, the surge in food stockpiling and preparedness has led to an increase in hiring at grocery stores.

Another strategy is to find a work-from-home job or side gig that keeps you and others safe while still earning money. Side gigs that could be in demand during a pandemic include online tutoring through companies like VIPkid or Education First, corporate cleaning services, or food delivery through DoorDash for older adults or those who can’t leave home.

While earning additional income is going to be on everyone’s mind during a job loss, it’s essential you practice safe habits like frequent hand-washing and not touching your face when you’re out job hunting. If you do get a job with a company, ask what procedures they have in place for employee safety during the pandemic.

More Tips to Save Money

As the current pandemic progresses, more people will face unemployment or drastically reduced working hours. Frugality and simplicity could become the new normal for a while. Other ways to save money include:

Final Word

Losing or leaving your job can be an incredibly nerve-wracking experience, even if you’ve done everything you can to prepare. And in the current pandemic, many people around the world are going through the same turbulent situation.

Fortunately, the federal government has approved a stimulus package for the economy, which will help many families. However, the more steps you can take to save money and be more self-sufficient, the easier it will be to weather an uncertain economy and come out ahead.

Are you facing a voluntary or involuntary job loss due to the pandemic? What tips can you share with others?

Heather Levin
Heather Levin is a writer with over 15 years experience covering personal finance, natural health, parenting, and green living. She lives in the mountains of Western North Carolina with her husband and two young sons, where they're often wandering on frequent picnics to find feathers and wildflowers.

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