Getting Finances in Order, Post Lay-Off

Getting laid off can be very emotional, but it’s important to not let your feelings get in the way of taking care of your financial life. I was on CNN this morning briefly discussing some important money tips, in the event of getting laid off. We didn’t get to everything, so here’s my entire rundown.

1. KNOW WHAT YOU’RE ENTITLED TO
Many companies offer severance packages – which you can negotiate – and legally workers must receive any accrued vacation. Dust off your employee guide book to refresh yourself on your entitlements and be prepared at your final meeting with human resources. As for any vested stock options you own, you typically have 90 days after the date you got laid off to exercise those options. Some companies may even extend that period. Next, if you had a contract with the company, go through the write-up to see what you’re entitled to receive. Perhaps you had a two-year contract and you only worked at the company for six months. The contract may have a clause that protects you from early termination and you may be able to earn compensation for the remaining time on your contract.

2. APPLY FOR UNEMPLOYMENT BENEFITS
Do this as soon as possible for the simple fact that benefits are drying up in some states and overall there is a wait from when you apply to when you actually receive your benefits, which may be three or more weeks. Rest assured that once you start collecting unemployment, the payout is retroactive from the date you applied. In most states you can apply over the phone or online. Visit the department of labor’s web site for details on eligibility requirements, as well as where to apply for benefits.

3. SECURE YOUR HEALTH INSURANCE
If you were getting health insurance at your old job and your old employer is still offering health insurance to existing employees then you can apply for COBRA, which provides up to 18 months of health insurance after being laid off or leaving voluntarily under good terms. If you got laid off because your company went bankrupt, you won’t be eligible for COBRA.

You need to tell your health care provider that you want to enroll in COBRA within 30 days of getting laid off. Your company’s human resources department should have the application information or you can go to the Department of Labor’s web site at www.dol.gov. COBRA can be pricey, since you have to pay the entire cost your employer pays plus a 2% administrative fee. Monthly COBRA premiums can easily run up to $400 for single coverage and $1,200 for family coverage.

Some more affordable alternatives: Check with your spouse. If your wife or husband is getting is getting insurance from his or her employer, see if you can piggyback on that and sign up for your spouse’s employer-sponsored health care insurance. Or if you’re single, still young and healthy, consider an individual policy by shopping online, comparing rates. Beyond that there are ways to get health insurance with group discounts through union membership or going through a professional organization. Still others have been known to take courses part-time at a local school, where you may be able to get group health insurance. If you have kids, contact your state’s children’s health insurance program (SCHIP) to see if they are eligible for coverage.

4. HOLD ONTO YOUR 401K
You may be tempted to cash it out, but remember your 401k is for retirement, not to pay for your living expenses now. There are major tax penalties associated with an early withdrawal from your 401k before age 59 ½. The best thing to do is to either leave your money in the existing account until you get another job and roll the money into your new employer’s 401k plan, or roll that money penalty-free through a direct transfer into your individual retirement account or IRA.

5. TRIM THE FAT FROM YOUR BUDGET
If you don’t have at least 9, 10 months of living expenses covered in a savings account you need to pare down your monthly spending to get to that level of financial security. For some that may mean taking drastic measures like downsizing to a smaller house, selling the car or taking on any part-time job just to build a savings. For others, it may mean cutting spending. An immediate way to bring your expenses down is only using cash. If you’re going to use plastic, use your debit card. Nixing credit cards and relying on cash can make you 20% richer. The fact is we overspend when we use our credit cards, but cash inevitably limits us. Next, look at your variable monthly expense like food, gas, clothing, entertainment, etc. How can you cut corners to ensure that your fixed expenses like your mortgage, your car payment, your child’s tuition are covered? Don’t pooh-pooh coupons and start buying more dry goods in bulk to save. Remember everything’s negotiable – rent, cable bill, haircuts, college financial aid, you name it. Speak up and ask for discounts everywhere you can.

6. KEEP JOB HUNTING-RELATED RECEIPTS
Collect receipts that reflect your job searching status. If you printed out your resumes, the ink and the paper is tax deductible. The same goes for relocation costs and any mileage you rack up on interviews.

7. REFRESH YOUR RESUME & TAP INTO YOUR SOCIAL NETWORK
We’ve seen many more Twitter posts and Facebook status updates saying things like “looking for a new gig” or “know anyone in marketing who’s hiring?” For the first time we are experiencing major unemployment in the social network era. Take advantage of that. Know that there is nothing to be ashamed of if you got laid off. It’s not personal. Job losses are happening to a lot of qualified, experienced talented workers. You need to do your best to get the word out, to inform others that you’re looking and you’re ready to take on a new assignment.