Losing a job can be one of the most stressful life events.
Especially when it comes to finances.
It’s normal to feel overwhelmed.
Yet, being proactive can help you regain control and financial stability.
There are three categories of focus:
- Audit & Document (spending grid & budget)
- Income Plan and Potential
- Expense Elimination and Trimming
Below are 10 actionable steps across all three categories.
1. Audit the Situation
Before making any decisions, take a close look at your current financial state.
This includes understanding your household income, expenses, and savings.
- Document Expenses. Go through your last 12 months of spending and document all the expenses by category. Break them down as detailed as possible. Highlight the must-pay items like housing, utilities, food, insurance, and loan payments. On a separate sheet identify the items that are not paid monthly like property taxes and holiday gifts. This helps you understand costs by each month of the year and establishes the “financial floor”.
- Understand Your Savings. Knowing how long current savings will last helps with planning and avoiding panic. Factor in unemployment benefits, severance pay (if applicable), and any side income.
This step helps you see exactly where you stand, giving you a clearer picture of how long you can sustain your lifestyle without dipping too far into debt.
2. Rework Your Budget
With your new financial reality in mind, it’s time to create a leaner budget.
- Eliminate non-essential spending. Now is the time to pause on discretionary expenses like dining out, streaming services, gym memberships, and online shopping. Prioritize needs over wants.
- Renegotiate bills. Call your service providers (mortgage, internet, phone, insurance) to negotiate lower rates or explore hardship options. Many companies are willing to work with you if you ask.
- Switch to cash or debit. Limiting credit card use can prevent further debt accumulation.
A streamlined budget gives you peace of mind and stretches your savings as long as possible.
3. Understand Unemployment Benefits
If eligible, unemployment benefits can provide a safety net during your job search.
- Apply promptly. File for unemployment benefits as soon as possible to avoid delays. Each state has different requirements, so check with your local unemployment office.
- Understand the details. Get familiar with how much you’ll receive and for how long. If necessary, research programs like SNAP or housing assistance that may be available.
4. Assess “Plan B” Assets
Document the assets that could be leveraged if the financial situation gets challenging. These could be straightforward like taking a loan from your 401K or selling an asset that isn’t being used.
The plans could also be more complicated like taking a home equity loan, understanding the tax implications of tapping into your 401K (withdrawal, not a loan) or deciding to move to a less expensive home (lower cost neighborhood or smaller home).
The possibilities are there. However, some may involve reconsidering what you want your lifestyle to look like and the emotional burden that could come with significant changes.
5. Explore Income Options
While searching for your next role, you can consider generating additional income in the interim.
- Freelancing or gig work. Tap into your skills to explore freelancing opportunities or consulting in your field. Take on gig economy jobs like driving or delivery services.
- Leverage your network. Let people know you’re available for short-term projects. Sometimes word of mouth can connect us to unexpected income streams.
- Sell unused items. Go through your home and declutter, selling anything you no longer need on platforms like eBay, Facebook Marketplace, or Craigslist.
Every bit of extra income helps cushion your finances.
6. Dig into Your Mortgage and Loans
Don’t ignore mortgage & loan payments. When we are struggling, we need to act.
- Contact Creditors. Many companies offer temporary relief or forbearance options for individuals facing financial hardship. They would much rather work with you than have you default on monthly payments.
- Explore debt consolidation or refinancing. If your credit is in good standing, consolidating high-interest debt or refinancing mortgage/loans can reduce monthly payments, giving you some breathing room.
The key is to be proactive. The earlier you communicate, the more options you may have.
7. Consider Health Insurance Options
One often overlooked aspect of being laid off is losing health insurance. Make sure coverage is there by exploring options such as:
- Spouse or partner’s plan. For those who are married, joining your partner’s insurance plan may be an easy solution.
- COBRA. While expensive, COBRA allows you to keep employer-provided health insurance for a limited time.
- Marketplace coverage. Through the Health Insurance Marketplace, there are more affordable plans, especially if you qualify for subsidies.
While this is a cost that might be tempting to avoid, your risk is that if something happens medical bills could be added to your stress.
8. Renegotiate or Cancel Ongoing Bills and Subscriptions
Even fixed monthly bills like cable, internet, and insurance can often be renegotiated, especially when you explain the current situation.
- Call your service providers. Many companies offer discounts, promotional rates, or temporary hardship plans for customers facing financial difficulty. Cable, internet, and cell phone providers may lower your bill or allow you to switch to a more affordable plan.
- Review auto and home insurance policies. Contact insurance providers to see if they can adjust your rates or offer discounts. You might also consider raising your deductible to lower your premium in the short term.
- Shop around for better deals. If current providers aren’t flexible, it might be worth switching to a more affordable competitor. Price comparison websites can help us quickly find better rates for everything from insurance to utilities.
- Negotiate rent. If renting, talk to the landlord about a temporary reduction in rent or deferral due to the significant financial hardship.
- Cancel or pause subscriptions. Review streaming services, subscription boxes, gym memberships, and app subscriptions. Many services allow us to pause rather than cancel outright, which can be useful for temporary financial relief.
- Use free subscription alternatives. Explore free or ad-supported versions of the services you use, such as using a library card for e-books or streaming free TV channels.
Renegotiating these ongoing expenses can free up extra cash every month, giving more financial breathing room.
9. Maximize Grocery Savings
Food is a necessary expense, but there are plenty of ways to trim our grocery bill without sacrificing quality or nutrition. Here are just a few ideas.
- Use coupons and cashback apps. Apps like Ibotta, Fetch Rewards, or Upside can help you earn cashback or find deals on everyday grocery items.
- Plan meals around sales. Check store flyers and plan meals based on what’s on sale that week. Consider shopping at discount stores or wholesale clubs for bulk items.
- Opt for store brands. Generic or store-brand products are often just as good as name brands but cost significantly less.
- Batch cook and freeze meals. Cooking in bulk saves both time and money. You use the food before it goes bad and reduce the temptation to spend on takeout when you’re tired.
Being strategic with grocery shopping can lead to significant savings over time.
10. Cut “Extra” Spending
It’s important to distinguish between needs and wants during this time, especially when it comes to personal expenses.
- Delay non-essential purchases. Consider hitting pause on buying new clothes, “fancy” shampoos, or luxury items until your finances stabilize.
- DIY beauty and grooming. Instead of going to the salon, explore at-home options for haircuts, manicures, or skincare routines. There are tutorials online and we can save a lot on these services. With the extra time, you can also consider making your own personal care products. There are online recipes for everything from soap and shampoo to laundry detergent, window cleaners and more.
- Buy secondhand. For items we do need, such as clothing or household goods, look for secondhand options at thrift stores or online resale platforms like Poshmark or Facebook Marketplace.
Small changes can make a big impact on your budget and may change your philosophy on spending far after you have moved through this job transition journey.
Your Turn
Do you have additional ideas to add to this list that can help others?
Which ideas on this list have worked for you?
How could you use this list to improve your financial situation even if you are currently working?