Personal Finance Steps to Take in Preparation for Losing Your Job

• Author: Jeffrey Simmons
• Posted: 2024-08-12

It is an unfortunate reality in an economic crisis that jobs are at risk. Many people feel that there is not much that they can do to prepare themselves financially for a layoff. The jobs reports for the coming months may show the most jobs lost in a month since the depths of the Great Recession. There are things that you can do to blunt some of the impacts of a layoff. Here are four steps that you can take to prepare yourself if you know that your job is in danger.

Line Up Some Side Hustle

While the economy may not be strong, there is always the possibility that you can find work in the gig economy. Of course, things like driving Uber may be out when people are stuck inside, but there are various freelance jobs that may be available to you. Figure out whether you have any skills that you could offer that someone would pay for and then decide how you can monetize this skill. The downside to this approach is that it will complicate your picture when you file for unemployment, but many people would rather be in the workforce in some way if they are able. You may even be able to earn more doing this than you would receive in unemployment benefits.

Figure Out Where You Can Cut

One of the first things that people do when they lose their job is panic about their expenses. It is daunting when you think about the money that you need to come up with every month when there is little to nothing coming into your account. Try to get ahead of the curve and arm yourself with a plan for what you can cut right off the bat once you lose your job. This will help you by cutting back on money that you will spend unnecessarily. Having this plan in place can even help reduce your stress marginally and help you focus more on what you can do to find employment. You may even be able to think more clearly in reaching your plan if you do this while you still have a job.

You should already have a sense of what the rock bottom amount that you need to get by every month is. In other words, this is your bare-bones budget, and you should be armed with it when you know that times are about to get rough.

Save What You Can

To the extent that you can put extra money in your emergency savings before the layoff comes, it can help with some unanticipated expenses that come in during this time. We cannot pretend to tell you that the few hundred dollars that you squeeze out of your final paycheck or two will make the difference between making it and not, but you never know what you will need the extra little bit that you can save during this time.

Besides, saving at the possible end of your job will get you in the habit of cutting expenses should you need to in the future. When you have to cut back after losing a job, you will already be in the mindset of sacrifice so it will be an easier transition for you to make. Even a little extra money can provide a little peace of mind during a stressful time.

Have a Plan for Your Debt

You obviously will not be able to pay off your debt when you are without a job, and chances are that your debt will increase during this time. Before you lose your job, you should call around to your creditors and learn their policies on forbearance and hardship. Some creditors may be willing to cut you a break when you are out of a job because the last thing that they want is for you to declare bankruptcy. Some creditors may be willing to work with you during this difficult time because it increases their chance of getting paid. At the very minimum, you should have a general priority plan among your debts to figure out which ones will need to be paid and the minimum amount of payment that you must make to keep your accounts in good standing. This will take some planning ahead of time so that you can have an effective means of dealing with your creditors when money gets tight.