Personal Finance

How to Bounce Back From a Job Loss

Sep 08, 2020

A job loss can feel like a blow, no matter when it strikes. And with a global pandemic raging – alongside a tanking national economy – the stress of a job loss will certainly be intensified. How does one recover with no clear end in sight?

As bankers, we know a thing or two about economic disasters. For the past 20 years, we’ve supported our customers through several economic crises – and, in time, have watched them recover. While this particular crisis is unlike one we’ve seen before – we don’t often get to witness a global pandemic – some career truths are timeless.

It can be difficult to plan next steps through uncertainty, but it’s important to take action as soon as possible. With some careful forethought, you can make the most of your unemployment – in spite of this pandemic. In this article, we share eight action steps to help you get back on your feet.

First, Understand That It’s Okay

It’s important to understand that unemployment cannot stop you from pursuing your dreams and career goals. Nearly every employee will face a setback at some point in their career. This is simply a bump in the road, not a scarlet mark on your employment history. One silver lining of this pandemic? You’re not facing it alone. And, future employers will not fault you for losing a job during a global catastrophe.

Of course, the news of your unemployment may still come as a shock. And, it will undoubtedly take some time to adapt. Try not to let this new reality overwhelm you. Instead, take care of yourself – this includes your physical and mental health. Use this newfound time to exercise, stay healthy, and reconnect with family and friends. Doing so will help you stay levelheaded as you make important decisions.

As you work through the emotional aspects of your job loss, try not to be too hard on yourself. Life has a way of taking unexpected turns. This pandemic was certainly unexpected. However, as with all things in life, the trick is to use setbacks as opportunities for growth.

Get Help Immediately

Apply for Unemployment Benefits

As soon as you learn about your new employment status, file for unemployment. The amount of time it takes to begin receiving unemployment funds will vary, so it is best to start the process as soon as possible.

If you’ve been gainfully employed for a while, you may feel uncomfortable with receiving money without working. Don’t. Unemployment insurance was created for your specific situation. Taking full advantage of this benefit will help you keep your finances on track.

To get started with unemployment, take a look at the federal unemployment website. You’ll be able to get a better idea of the type of unemployment assistance you might be eligible for. Next, visit your state’s unemployment website to file for your benefits and determine your next steps. Many states require a job hunt record and have specific procedures that must be followed – understand all the rules so your unemployment remains in good standing.

Reach Out to Your Network

Your network is your best resource for insider information on job openings. Make your job hunt easier by tapping into this vital resource.

As soon as possible, make an announcement via email and social media to let people know that you are available. Don’t be afraid to reach out to people directly to ask about opportunities at their workplace. Companies typically offer employees a financial incentive for bringing in new hires. So, if a friend or acquaintance lends you a recommendation, it can be a win-win situation for both of you.

Be Smart with Your Spending

Make a Budget ASAP

The loss of an income stream will likely necessitate cutbacks in your spending. If you haven’t created a budget already, then now is the time. If you already have a budget, adjust it to reflect your new income.

The basic budgeting formula is 50% toward needs, 30% toward wants, and 20% toward savings or debt repayment. With a reduced income, however, you may want to focus on just your needs for now. Living within your means is your top financial priority – this will allow you to make do with your unemployment income without blowing through your entire savings. It is also not the time to splurge on wants or prioritize outstanding debts.

Take a few minutes to create a realistic monthly budget for your temporary unemployment. If you have money left over after your needs are covered, you can start to add “wants” back into the budget (assuming, of course, that you’re still spending within your means).

Act Your Wage

If you are lucky enough to have an emergency fund on hand, you have the ability to be more flexible in your spending. That being said, you still want to be smart. While you are unemployed, try to leave your emergency fund untouched for as long as possible. Until you have a solid job opportunity lined up, it’s in your best interest to live a more modest lifestyle. In fact, it could be the perfect opportunity to try a spending fast.

A spending fast is a chance to reset your spending habits. For 30 days, a spending fast will challenge you to spend money on essentials only. That means groceries, transportation, bills, and other core expenses. The purpose is intentionality – use this time to really separate your needs from your wants. After you have a better grasp of what you truly need, it will be easier to recalibrate your spending and adjust to a lower income.

Don’t Touch Your 401(k)

If you’ve been diligently saving for retirement in your 401(k), it can be tempting to dip into those savings. However, that can be a dangerous move for your long-term financial wellness. After all, your retirement will last much longer than your unemployment. Your main priority is to ensure that you have enough retirement savings to sustain yourself.

Tapping into your 401(k) is a surefire way to delay your retirement dreams. On top of this, you can incur an expensive penalty when you withdraw funds prematurely. Not to mention, you will also pay the opportunity cost of missed compound growth.

Instead of dipping into your 401(k), use your unemployment funds or find another source of income to fund immediate cash needs. If, after exhausting all of your options, you are forced to pull money out of your 401(k), then consider a 401(k) loan. With a 401(k) loan, you can take a limited amount of funds and repay the loan, plus interest. 401(k) loan terms can vary based on the company, so do your research before taking this step.

Stay Away from Credit Cards

Similar to tapping your 401(k), credit cards are another dangerous temptation for funding your unemployment. While they’re an easy source for cash, credit cards can lead to a slippery slope of mounting debt.

As a general rule, you shouldn’t put purchases on your credit card unless you have the cash available to pay your statement at the end of the month. With that in mind, it’s a bad idea to rack up credit card debt without a stable source of income. If you must use a credit card, be smart with the APR. If you do your research, you may find an introductory offer with 0% APR for several months. Take advantage of lower introductory rates whenever possible.

Expand Your Career Opportunities

While you’re on the job hunt, you can also find ways to earn money on the side. The gig economy is full of opportunities for picking up extra cash. Sure, you might not have a full-time job for now, but you can still earn enough side income to make ends meet.

The most popular gig jobs include driving for Uber or food delivery apps. However, if you have a marketable skill that can be used remotely, consider doing freelance or consulting work. Some popular freelance websites include Upwork, Guru, and Toptal. You can also find freelance contracts through LinkedIn and Glassdoor. Or, reach out to your network to see what opportunities are available.

Bounce Back with Grace

A job loss can feel terrible, but, to bounce back with grace, you must act quickly and with purpose. Take care of your mind and body as you search for a new job and leverage unemployment benefits to keep your finances on track. Beyond that, if you spend your money wisely while getting creative with career opportunities, you may turn this loss into a financial opportunity for growth.