How to Cope With the Challenges of Job Loss and Keep Your Personal Finances Running?

By Charles Hopkins Published 09/19/2006 | Finance

How to Cope With the Challenges of Job Loss and Keep Your Personal Finances Running?

It is devastating to get canned from the workplace. But you should understand that life does not end because you have been handed over a pink slip. Most of us become escapist when it comes to sparing some thoughts on the consequences of job loss. But we should be practical enough to think of some financial preparation to cope with the challenges of job loss. The experts are of the opinion that if you have been managing your finance well enough when you are on a regular payroll, it will be not too hard for you to sustain yourself for a while without a job.

Preparedness is the key to overcome financial disasters in any form. We do not know, what is going to happen tomorrow, so we should always make preparation for dealing with the worst in the future. So it is important to make a neutral assessment of your personal finances and locate the strengths and weaknesses of your financial status. List all the sources of income and the areas of expenses. Also calculate the amount being contributed to several savings and investment programs. Making such a list will help you better locate the areas of unavoidable and optional expenses and that will help you to shred the nonessentials.

Now, try to work out the liquid assets. You might have certain investments that you can redeem before time without major penalties. This amount can be utilized to cover your more significant expenses until you are landed with another job. Check how much amount you are entitled to get from severance pay and unemployment insurance. Also calculate the amount you have to pay to continue with the health insurance under the COBRA Act.

This financial analysis will provide you the basis of starting some kind of plan to deal with such a situation. Here are some suggested actions you might consider to improve the situation.

First of all, cut out those expenses that are nonessential for your subsistence. As an example, paying for the membership of the gym is nothing but a luxury in a situation when you do not have a job.

It always pays if you maintain a good credit history by paying bills on time. Remaining in debt, at the time when you do not have a job may aggravate the situation even more. So always keep an eye on your credit card expenditure and make sure that all bills have been cleared within the grace period. Even then, if you have some bills unpaid, get rid of them as quickly as possible, otherwise you will fall into an vicious and tangled debt trap.

Contribute to build up an emergency fund with a six-month reserve to cover your expenses meanwhile. This will give you something to fall back into encase you exhaust the severance pay before finding another job.

You never know when the hostile weather turns everything upside down. So there is no harm in staying prepared, no matter how secure you feel professionally. So never stop exploring new possibilities. Also keep yourself open to the consulting jobs. Maybe you have expertise in some other field; explore the possibilities of making money out of these means. Maybe you are an engineer by profession, but your hobby of painting may come to your rescue in the days of financial crisis.