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Your Financial Life
By Transamerica / Jan 22, 2015

7 Financial Steps To Take When Out of A Job

unemployed worker carrying box with last paycheck and 401(k) documents

If losing a job isn’t stressful enough, what can cause even more stress is wondering how you will financially care for yourself and your loved ones while unemployed. Simply put, you will need to put together a contingency plan until your next job is found. Here are some tasks that can help pull you and your finances through what is no doubt a taxing time in anyone’s life.

  1. Gather your financial belongings. Upon your termination, you should at least receive a final paycheck. If you have assets, such as a 401(k) and/or a pension, consider rolling them over into an IRA once you’re employed again. Look into whether you are eligible for a severance package, which is a payout an employee receives when they leave a company. Some companies pay out severances immediately upon termination, while others pay in installments. Keep in mind that employers are not required to offer severance packages. At this time you should also check into any outstanding vacation time you might have. Be aware, however, that vacation payouts can vary from state to state.
  2. File for unemployment if you’re eligible. Depending upon your length of employment, you may qualify for unemployment. By no means should you be ashamed of collecting unemployment. Instead, be timely about this task, and make certain you are aware of all state and federal rules to avoid delays with your benefits.
  3. Get yourself out there. Utilizes resources such as online job boards and Internet job forums with members whose job experience compares with your own. Get in contact with job agencies as well. Now would also be a good time to update your resume.
  4. Keep up on your insurance benefits. Your company may extend insurance benefits while you’re looking for new employment. COBRA is one option for continuing your health coverage until you find a new provider, or join another employer’s plan. Be aware that your employer is obligated to allow you COBRA coverage for at least 18 months after your job ends. If you have a spouse who works for an employer that offers health insurance benefits, be sure to find out what coverage options are available through their plan. Don’t forget about other types of insurance including life, home and auto. If you find you are having difficulty paying the premiums, try to negotiate a payment structure with your provider. Avoid canceling your policy as it could be difficult to establish a new policy farther down the road.
  5. Pay your most important bills first. Determine the bills that are most imperative in your household, then make a list of which should be paid first. In most cases this can be a mortgage, auto loan and your utilities. If you do have problems paying your bills, contact your creditors. They, as well as utility companies, may negotiate specialized payment plans for you while you’re out of work.
  6. Identify and utilize potential tax write-offs. While unemployed, you can deduct a plethora of expenses related to your job search, which can include printing costs, postage, hiring employment agents, and travel to interviews. You can also qualify for a tax deduction if you decide to start your own business. As far as paying taxes go, if you find you can’t pay your own when they’re due, look into any grace periods the IRS might offer in order to get more time to file your returns. Consult with a tax professional before making decisions about your filing.
  7. Consider your tax withholdings and retirement contributions. If your spouse is working, they may want to reduce their withholdings to bring more money into your household. Remember, the IRS lowers withholdings if only one person in a household is a wage earner. You may also want to temporarily lower the amount you contribute to your retirement plan. You can raise your contributions to their former levels once you have a new job.

A job loss is daunting. The sudden lack of income, and uncertainty of upcoming job prospects, can be alarming. Take off a bit of that edge by putting in order your post-job responsibilities and finances as you seek future employment.

Transamerica and its agents and representatives do not provide tax or legal advice. The information contained in this article is for informational purposes and should not be construed as legal or tax advice. For legal or tax advice concerning your situation, please consult your attorney or professional tax advisor.