A job is a person's livelihood. It makes up the majority of her weekdays and fuels many of her casual conversations. It's a psychological marker that makes up part of who we are as we tie ourselves tightly to our titles.
So what happens when you get laid off? If you have a financial plan in place to catch you, that's great, but most Americans don't even have a regular savings account or rainy day fund, let alone enough to get them from one job to the next. There are a number of strategies and financial tips to remember when forcibly entering the world of joblessness.
Don't cash out your retirement
The money in your 401(k) may seem tantalizing at first, especially if you were with your previous employer for some time and the amount sitting there is high. Keep in mind, though, that apart from just having to pay some pretty exorbitant taxes, having something in place for retirement is essential.
Since most Americans will go back to work after getting laid off, chances are you can transfer those funds to your local bank and open an account to hold these, tax-free, until you get signed on with a 401(k) plan at your next job. Since around 40 percent of unemployed people are what the Bureau of Labor and Statistics refers to as "long-term unemployed," you might want to expect a lull in your working world of 6 months or more.
Long-term savings
It may seem like a daunting task to consider saving enough money to cover 6 to 8 months' worth of expenses. However, the alternative is as frightening as the aspect of opening an account and starting a new savings initiative. Without that money to fall back on, you could be in a situation where you can't pay for your car, your utilities or even your home.
PT Money recommends setting up a regular deduction from your paycheck to go straight into your savings account before you even get paid. That way there's no need to think about how much you want to put away every other week because it's already there. This will remove temptation and speed up the process.
If you're already unemployed, be sure to file a claim with your state's unemployment office as soon as possible, and then come up with a strict budget to make sure you won't run into trouble.