As most people continue feeling the effects of covid-19, millions of employees feel overwhelmed about their savings and paying bills in the future. It can be more challenging if you have had a drop in income or have lost your work. A sudden drop in income or job loss can affect your budget significantly, but by taking suitable measures, you can avoid long-term financial impacts. Here are moves to take after a job loss or drop in income.
1. Create an Emergency Budget
Suppose you have lost your job or are facing an income drop, come up with an emergency budget. The first step of creating this budget is noting down the money you have or expect in your emergency savings, including your spouse’s income, severance payment, or unemployment. Then review your spending and categorize them into must-pay bills and the ones to cut down. An emergency budget can help you simplify your expenses and disclose ways to save better.
2. Evaluate your Health Insurance
When you are laid off from work, you often lose your company insurance. It is best to address any emergency health issues while the company still covers your insurance so that when you can’t afford the insurance, your health concerns don’t turn out a high cost. If you get laid off, try to replace your health insurance either through a family member or Consolidated Omnibus Budget Reconciliation Act so that when a health emergency arises, you are covered financially.
If you qualify for COBRA health insurance, you will pay for monthly premiums. If you don’t, there are other insurance options. Depending on your age, your parents can add you to their insurance plan. If you have a spouse, they can include you on their insurance plan. You can also apply for federal government health insurance.
3. File for Unemployment and Collect Final Payment
If you lose your job, ask for your final paycheck from your employer and how you will get it. Most states require employers to pay their employees after job termination. Other states also allow employees to be paid for sick days and accrued and unused vacation time. Additionally, do not forget to look at eligibility for partial and complete unemployment benefits. Currently, filing for unemployment has been made faster and easier.
You may qualify for weekly unemployment benefits if you are cut off from work. If your hours get reduced or a pay cut, you are eligible for partial unemployment insurance benefits. It is now easier and faster to apply for unemployment benefits. You can do it through a telephone call, in person, or online using your unemployment insurance database immediately after being laid out.
The process of applying for unemployment benefits varies in different states. Most states use an online calculator to give you a clue on how much money you can collect weekly from unemployment benefits and how long it will last. It will take several weeks to receive your first unemployment check after filing your claim. This shows it’s best to file your claim as soon as you lose your job.
4. Discover Emergency Cash Options
It’s always a good idea to have some cash in your emergency fund for your future needs. However, if your income reduces and you can’t save some cash or meet your daily expenses, it can be tricky figuring out how to meet your everyday spending.
Before borrowing any emergency cash, it is essential to weigh down your choices and risks associated with different borrowing options to ensure you get the best terms that meet your situation. For example, if you apply for a personal loan, its rate can be lower than the credit card interest rate. You may be tempted to loan your retirement savings but before making this choice, carefully weigh it down as it may tamper with your lifelong plans. Though you can borrow a loan from your retirement savings, there are some restrictions associated with it, and you should make sure your situation fits its terms as possible.
5. Navigate Other Sources of Income
It can take time to land a full-time employment position, especially when you are thinking of changing your career path. If you are concerned about your reduced income or job loss, consider part-time work. It can be an ideal way to learn a new skill and earn extra cash while looking for a new job opportunity. But it is also essential to understand the trade-offs and benefits associated with the gig economy. There are multiple part-time job opportunities, including serving as a freelance customer support representative or delivering food to increase your income flow until you land a new role.
It is a perfect idea to revise and dust down your resume and cover letter to be in good shape when you need it. Also, check on your interview skills. Research on the position you want to apply for will help you make a great impression when called for an interview. Ensure you be honest with any potential employer. They might be aware of your employment history and why you lost your job. Explain your reasons for being laid off from work, what you have learned and what you aspire to do in the future to avoid mistake repetition.
6. Contact Companies You Owe
Even with the best plan in place, job loss can sometimes make it stressful to make ends meet. If you are having difficulties paying your monthly bills and debts, consider reaching out to your creditors and see whether they can adjust the terms of payment on your account to get an amount you will be comfortable paying during this time.
Most lenders and banks have relief policies that help ease the repayment burden when you are in a difficult financial situation. But first, you will have to explain your financial situation and then ask them to suspend interest, payments, and fees on your credit cards and loans. You can also speak to your service provider, including your telephone and cable companies, to reduce their rates.