SURVIVING FINANCIALLY AFTER JOB LOSS

posted: Tuesday, September 15, 2009

by Donna Holmes, Financial Counselor

Losing your job through downsizing, corporate restructuring, or workforce reduction can be one of the most traumatic events in your life. An unexpected job loss may cause difficult financial repercussions, not only for you, but also for your family and friends. Taking stock of your financial situation, creating a plan, and avoiding common financial mistakes will help you get back on track financially and survive the economic storm.

Taking Stock of Your Financial Situation
If you qualify, apply for unemployment benefits as soon as possible. Knowing what you have to work with will give you some idea of how long your resources will safely cover you and your living expenses. If you have a spouse that is still working, he or she may want to adjust income tax withholding by completing a new W-4 tax form. Changing the tax exemptions could help put more money back into the one-paycheck household until the other partner gets a job. Once employment for that partner is restored, reduce the exemptions to what is normal for your taxable income. Ask a tax advisor for help in this area if you are not sure what to withhold.

Create A Plan
Once you know how much you are working with financially, contact each one of your creditors to negotiate payment options. Creditors may agree to restructure your loan to lower payments or defer payments for a few months to give you time to get things in order. Keep in contact with the lender especially if job seeking takes longer than you expected and re-negotiation becomes necessary.

What are Some Things I Can Do?
If you are in the situation where you have no emergency funds to get you through the first month or two of unemployment, instead of cashing out your retirement plan, consider some of these possible solutions to short term money problems below:
• Get rid of any unnecessary expenses, such as cable television or dining out.
• Request debt restructuring from the lender to reduce monthly payments.
• Request loan deferral which allows you to skip payments and move the due date 30 to 60 days ahead.
• If you own a home, you may be able to arrange for a forbearance agreement with your mortgage holders. This agreement enables you to pay nothing on your mortgage or to make a partial payment for a set period of time. The difference is made up in the future when you can resume regular payments.
• If you are renting, consider moving to a less expensive place, moving in with a friend, or getting a roommate.
• Avoid scams and get-rich-quick schemes.
• Ask family and friends for support and encouragement.
• Consider using employment agencies that place professional people in new positions without a fee.
• If you have problems with credit, consult a nonprofit consumer credit counseling agency. Seek assistance with debt consolidation or try working with your creditors.
• Seek free financial counseling services in your community.

Mistakes to Avoid
It is common in the first few days to feel panic and some people will make costly mistakes during this time. Here are some financial actions you should avoid, if at all possible:
• Using credit to purchase goods or services
• Using predatory lenders for extra cash
• Increasing your debt load
• Borrowing money
• Filing for bankruptcy
• Cashing out your 401(k) retirement savings
• Using all your savings paying off credit cards
• Cashing out your pension plan
• Making major decisions, such as selling a piece of property

Once you get back on track, keep in mind to protect your financial future by establishing an emergency fund with 3 to 6 months worth of your monthly income. For more guidance with finances, SAFE Federal Credit Union provides free financial counseling service for its members. To make an appointment you may call 803-469-8600 or toll free 1-800-763-8600 ext. 211 or email dholmes@safefed.org.

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