How to Protect Your Finances When You Lose Your Job

Losing a job is not a fun situation that anyone wants to find themselves in. Yet, life throws its punches and all we can do is hope for the best and prepare for the worst. So, if you’ve found yourself reading this in the unlucky event that you’ve lost your job, or if you’re just one of those types who likes to be ahead of the game, here’s a few ways to help safeguard your earnings.

Set up an emergency fund

If you haven’t already done so, now is the time to start creating a 911 account. Having an emergency savings account is a good financial backup for lots of scenarios—not just job loss.  Your emergency account should be used for serious monetary situations only, including covering potentially detrimental car or home repairs, paying for rent in the event you no longer have a reliable source of income or to help pay for medical care. Start by setting a monthly savings goal. Saving regularly is a habit that needs to be established as early as possible, and it’s never too late to begin! Consider setting up an automatic transfer each time you’re paid so you don’t miss contributions. Or, think about moving any extra dollars from your checking into your emergency fund at the end of the month.

Use Unemployment

While there are some people out there who may rely too readily on unemployment, you shouldn’t be afraid to use it in the event of job loss… that’s what it’s there for! While applying for unemployment, you may also want to check to see if you qualify for your state’s unemployment insurance. You can call or email your state’s unemployment insurance office to see if you’re eligible. Getting a handle on how much you can claim as well as the length of time you will be able to receive benefits can help you create a financial plan for the next few months. 

Stick to your budget 

Whether unemployed or not, setting a budget is absolutely fundamental. Budget creep is one of the largest reasons people fall into debt, and in the event you lose your job, sticking to your  budget will be more important than ever. Revisit exactly how much you must spend on your “can’t-live-without” expenses

  • Rent/mortgage 
  • Food 
  • Car payments 
  • Bills 

Establishing what that amount is will give you an up-to-date understanding of exactly how much you need to “keep the lights on” until you find a new job. It’s really important to understand that other than those must-haves, everything else is extra. If you primarily use a credit card to make day-to-day purchases, you may want to think twice about putting items on your credit card if you don’t have the money in your checking account to cover them.

Reduce extras 

A change in income should immediately signal a change in spending. You’ll want to cut costs as quickly as possible. As previously mentioned, anything outside of your most crucial living expenses needs to be reevaluated, which may include gym memberships, subscriptions, eating out and other entertainment expenses. This may seem overwhelming; however, there are lots of apps available which can help locate the subscriptions you’ve signed up for and can even cancel subscriptions, negotiate your cable bill, or help save you money on car insurance. 

Other budgeting apps keep track of all your accounts, including checking, savings, and retirement. All your transactions can be automatically recorded and categorized in order to track spending patterns and create a personalized budget. Just make sure to pay attention to any apps that may also incur a monthly subscription cost.

Takeaways

Losing your job can be a chaotic time for your finances, but with the right tools you can take control of your budget and get back on track in no time.

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