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Monday, March 9, 2009

A survival guide for the unemployed

Just lost your job? These 13 tips will help you find ways to cope, from keeping up your spirits to prioritizing your spending.

By Liz Pulliam Weston

If you've just lost your job, the decisions you make in the coming days and weeks may be critical to your financial survival.
How you organize your time, corral your resources and handle your money will help determine whether this job loss is a temporary setback or a potentially life-changing disaster.
But your most important task will be managing yourself, said career coach Nancy Collamer.
"It's OK to catch your breath and lick your wounds," said Collamer, the publisher of the Jobs and Moms Web site and author of the e-book "The Layoff Survival Guide." "Take a week, two weeks if you need it" -- but then get going.
Here's what you need to do:
Get your head on straight. Keeping your spirits up, your energy level high and "a realistic sense of optimism" will be essential skills in helping you navigate the road ahead, Collamer said.
Your spouse or partner may be as freaked out as you are, and your friends are busy trying to keep their own jobs. While family and friends can try to help, what you really need is a job-hunting "board of directors" that can give you advice and encouragement, Collamer said. That means finding a job-search support group; the Web site Job-Hunt, she said, is a good place to start looking.
Schedule your job search. Get up early, take a shower, put on nice clothes and schedule what you'll do for the day.
"Even if you don't have appointments, you can take some time on Sunday night or Friday afternoon or whenever it works for you to schedule out your week," said Collamer, whose husband's layoff in 2001 prompted her to write the unemployment guide. "You might decide that from 9 a.m. to 11 a.m. you'll research new companies on the Internet and from 1 p.m. to 3 p.m. you'll go to the library and check out three books on writing résumés to see what you can do to improve yours."
Having a schedule keeps you moving forward, Collamer said, and preserves "that sense of dignity" that can be lost when the structure your job used to give you suddenly, and unsettlingly, disappears.
"You want to have that feeling at 5 p.m. that you're done for the day," Collamer said, "and that you've accomplished something."
Let people know how to find you. Your business and professional contacts may have only your work e-mail address and telephone number. As soon as possible, send a short e-mail to all of your contacts letting them know your personal e-mail and phone number. Mention the change in your job status (Collamer recommends something like, "Because of a staff reduction, my last day at XYZ Industries was Oct. 29."). You can follow up later with more-personal notes to key contacts to let them know you're looking for work.
Stay covered. If you had health insurance through your job, you should be able to purchase continued coverage under COBRA rules, but that can be an expensive way to go.
Fortunately, you usually have 60 days to sign up under COBRA, and the coverage is retroactive, so you don't have to decide right away. If you get another job quickly, you may not need the coverage. If you don't, you may find that a high-deductible individual policy is a better deal. Read "Your 5-minute guide to health insurance" for more details.
Apply for unemployment benefits. If you think this is a no-brainer, it's only because you haven't seen the e-mails I get from readers. Some worry that applying for unemployment will affect their credit (it won't) or that jobless benefits are some kind of welfare (they're not; your employer paid into the system in your behalf).

The earlier you apply, the earlier you'll get your first check. Most states have a two- or three-week waiting period based on when you file, not when you lost your job. Unemployment benefits typically last for 26 weeks, although during periods when the state jobless rate is high, those benefits may be extended for an additional 13 to 20 weeks.
The amount you get won't replace your old paychecks -- far from it. The national average unemployment check is about $270 a week, and the maximum you can receive depends on your state. In high-cost Connecticut, it's $501 a week; in Mississippi, it's $210. Contact your state's employment office for details on how to apply and how much you're likely to get.
Unemployment benefits are typically available only to workers who lost their jobs through no fault of their own. You generally can't get benefits if you were fired for cause or voluntarily quit your job. If the facts are in dispute, though, go ahead and file; you can always argue your case, and you'll have a chance to appeal if your state's unemployment office decides against you. Track your spending. You no longer have the luxury of not knowing where your money is going. Keep track of every cent, at least for now. You can do so in a variety of ways: with a notebook and pencil you carry with you everywhere; with personal-finance software such as Money or Quicken; or with one of the online money-tracking sites such as Wesabe, Mint, Geezeo or Quicken Online.
Once you know where the money is going, you can look for ways to cut back. MSN Money's Smart Spending blog can offer tips and help.
Get your priorities straight. List your bills and other spending in order of importance. The items at the bottom of the list should be pretty easy to trim. You also should find savings by cutting back on big-ticket items such as groceries, dining out, utilities and transportation.
You should have another list: the "If Things Really Get Bad" list. Tops should be holding on to the roof over your head (the mortgage or rent), keeping the lights on (utilities) and ensuring you have transportation to get to job interviews (car payments and insurance). At the bottom should be your unsecured debts -- credit cards, student loans and other personal debt that paid for stuff that can't be repossessed. Read "How not to pay your bills" for details on the potential consequences for not paying various types of debts.
If you have to choose which bills to pay, your list will remind you what's really a priority. Skipping credit card payments may result in a ding on your credit and phone calls from creditors, but skipping mortgage payments could leave you homeless.
Some things to keep in mind:
If you're about to fall behind on an essential bill, such as a car or mortgage payment, contact your lender. You may qualify for temporarily reduced payments or a more formal "workout" or refinance, but you have to ask.
If you have student loans, contact your lender for a deferment or forbearance. Many lenders will allow you to suspend payments during unemployment, but contact yours for details and applications.
If your kids are in private school, discuss your options with the administration. Policies vary, but the school may be willing to discount tuition or set up a payment plan. If your unemployment lasts long enough, public school may be your only option, but you can at least explore your options for keeping your child in school until the end of the semester.
Conserve your cash. Paying down debt is generally a good idea -- until you've lost your job. Then cash becomes king.
If you've been making extra payments on your mortgage or student loans, redirect that money into savings. Negotiate with your credit card companies to get a lower rate (see "Get a better deal -- with a threat") or use balance-transfer offers to move your debt to a card with a better rate. Pay the minimums on your debt and get deferments on any loans that offer them. Most utilities and telephone companies offer "lifeline" or low-cost service for people with low incomes; check their Web sites to see if you qualify.

Don't tap your retirement funds if you can avoid it. It can be tempting to raid these pots of money, but the financial repercussions are so serious that you should avoid such withdrawals if at all possible.
Not only will you lose one-third to one-half of the withdrawal to taxes and penalties, but you lose forever the tax-deferred returns you could have earned. A $10,000 withdrawal now from your individual retirement account or 401(k) means $109,000 less for your retirement, assuming the money would grow at an average 8% annual rate for 30 years.
It's an especially bad idea to use retirement money to pay credit card bills. In a worst-case scenario, your credit card debt can be wiped out in bankruptcy court, while your retirement funds would be protected from creditors.
You also should be cautious about raiding retirement funds to pay for a mortgage on a house you may not be able to afford. If you're worried you'll lose your house, contact a HUD-approved housing counselor to review and discuss your options.

Use your home equity with caution. Setting up a home equity line of credit can be a smart precaution while you still have a job, if you're disciplined enough to use it only in case of emergencies. As with retirement funds, home equity is protected in bankruptcy court, so money from your home shouldn't be used to pay unsecured debts until you're back on your feet -- if then.
Raise cash. Use some of your new free time to organize a garage sale or sell items on Craigslist or eBay. Consider renting out a room in your home. Review all of your assets and your skills to determine which might be used to produce income. Good with tools? Take on a few odd jobs. (See "20 ways to make $100 more a month.")
Investigate businesses you can start at minimal cost, such as detailing cars, housesitting, dog walking, errand running or working as a driver or companion for the elderly. Be wary, though, of any business or franchise opportunity that requires a big upfront investment. Some of these so-called opportunities are scams; others are poor risks that depend on the desperate.
Identify emergency sources of aid. If your unemployment stretches on, you should know where the food banks are and familiarize yourself with how to qualify for food stamps or other government aid. Family and friends may be able to help as well.

Consider volunteering. You've lost your job, you're scared, and you're scrambling to find another paycheck. Who needs to waste time with unpaid work? You do, Collamer said.
A volunteer job can give you a sense of purpose as well as remind you that there are others worse off. Collamer remembers speaking to a job-support group in which one member survived a year of unemployment largely by volunteering with a paramedic group.
"It makes you feel good, and it can strategically be a good idea," Collamer said. "You never know who you're going to meet or who you might impress."

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