By Alpha Street Inc
August 19, 2020
Losing a job can be devasting to your finances & mental health. It raises the question, Why me? Did I do something wrong? Was I not good enough? Many times, it is not your fault, it is the fault of the economy or bad decision made by the executives of the company.
So now what?
Its time to get your house in order, take out your pencil, grab your bills, pull out your statement and let’s get to work. This is the time to make some tough decisions and cut expenses. Reacting quickly will help you minimize or avoid major problems that come with a loss of income.
Here are the Top 5 most important things to do when you lose your job.
- Apply for unemployment benefits and decide what to do with your health insurance.
- Rework your budget. Cut costs as much as you can.
- Update your Professional Portfolio – Update your Resume, Linkedin Profile and clean up your social media. Employers are checking.
- Connect with Co-Workers, Friends and anyone who can help you find a new job.
- Determine what you will do with your 401k.
Apply for unemployment benefits and decide what to do with your health insurance.
State’s unemployment programs are not equipped for mass layoffs. In fact, in the early days of the shutdown, millions of unemployed workers could not file for unemployment, it took some States weeks to process all the applications. Which was disastrous for many Americans. Don’t wait to file, as the turnaround time can be longer than you expect. Health Insurance is another item to tackle immediately, many employers offer Cobra, but it can be expensive option, programs like Obama care can be more affordable, but you need to apply within 60 days of your job loss.
Rework your budget
As a financial advisor, I find this to be the most important part of the prep work. For clients we plan for the worst before it happens. So, grab your pencils and your statements, its time to get to work.
Lets break your budget into 4 steps.
- Income (Side hustles, Unemployment, Rental properties) – You don’t have to have any or all of these items, but we need to know how much cash is coming in through the door, even if it’s just unemployment.
- Fixed expenses – This is the section where you see how much money you must spend every month. This includes your Mortgage/Rent, Utilities (Electric, Water, Cable & Internet, Cell Phone)
- Variable expenses – this is the place where you tend to have the most control. In this section you calculate your grocery cost, entertainment expenses (Going out), restaurant expenses, subscriptions (Netflix, GYM, Etc) and any other miscellaneous expense. I bet you can save $90mth, just by cutting out Starbucks. This is the part of your budget where you can get creative and the savings will add up.
- Now, the moment of truth, if you take section 1 (Income) and subtract section 2 & 3 (Expenses) you will see the monthly cash flow (Money left over / shortfall).
From this analysis, you will know what you have to work with to meet expenses at the end of every month. I will be happy to share my budgeting template to anyone who requests it.
Update your Professional Profile
This is where you can recreate / rebrand yourself. I know it may seem like it now, this is an opportunity to advance your career. Your employer may not have appreciated your work, but someone else will.
Do you want to change your career? Do you want to start your own business? Do you have a skill than you can brush up on? The choices are unlimited, the path may not be easy but it can be rewarding.
- Update your Resume – Make sure you have several versions catered to specific rolls you want to apply for.
- Update your Linked in – Add any new skills acquired and reach out to coworkers, acquaintances, recruiters and network with anyone in your targeted space.
- Clean up your Social Media – Update your account settings to private, clean up anything that you don’t want your potential employers to see and put your best foot forward.
Network, Network, Network
The best jobs are never advertised. Contact your friends, co-workers, and colleagues to be your eyes & ears. Perhaps one of them will be in a position to hire you, but the art of networking is the show your worth. Now that you have some free time, help out a charity, lend a helping hand to a person in need and target your groups. If you want to work for XYZ Corp, find out what cause is most important to them, volunteer your time at the cause. Odds are, you will meet someone of influence at your targeted company. Get to know the person, go out for a drink, never ask for a job. Instead, learn about what they do there, what the culture is like and casually mention your admiration for the company. Drop lines like, if an opportunity ever presented itself at XYZ corporation, you would love to be considered for the role. You see what you did here? You have aligned yourself with a the companies culture, built a relationship with a person of influence and have put yourself in a position for a role that hasn’t been published.
Do Not Forger to rollover your 401K
As an advisor, I cringe when I hear stories from individuals who have left their retirement plans at previous jobs or worse they cashed in the 401K.
If you are under 59 ½, you will pay a 10% penalty plus taxes on the money your withdraw. Let’s say you have a 401K plan with $5000. If you cash out the 401K, it will net you $3300. That’s assuming a 24% Tax Rate ( $1200) + 10% Penalty ($500). That’s $1700 you have lost on future retirement savings. Hardly seems like it’s worth it. When you can easily roll the money over into a Traditional IRA.
Now, If you rolled over your 401k into a Traditional IRA, Assume 30 years before you need the money, with a 7% annualized return (Avg of the stock market over a cycle) will get you a value of $38,061.28. This assumes no additional contribution from you.
I bet the idea of reinvesting sounds better to you now. Let us help you with that. www.alphastreetinc.com
Great calculator you can use
Now, I realize times may be tough, but you need to be tougher. Believe in yourself worth and view this as an opportunity to grow. Just keep your head down, stay safe and find your next golden opportunity.
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