Getting Back on Track After Unemployment

by Suba

So you are rehired after a period of unemployment. Great news! What a relief! Now celebrate it with a dinner, set up your direct deposits and start thinking about that kitchen remodeling? No, not just yet. There is a little more work to be done before settling into the new level of comfort – replenishing the emergency funds you might have used up for staying afloat during unemployment, getting rid of any debt you might have accumulated in that time, putting your retirement back on track and finally preparing for future unemployment; as bad as it might sound. There are a few things to be planned and prepared for – financially and psychologically.

Rebuild Your Finances

New job, a new budget : According to a survey by CareerBuilder,  43 percent of laid off workers took a job with less pay. This might be an improvement from 2010 figures, but it is still a significant number. If you took a pay cut it is very important to readjust your budget as soon as possible and plan for paying off any debt you might have accumulated while out of work.

Tackle urgent expenses : First tackle the most urgent expenses like mortgage payments, car repairs and the like and save the rest.  Mortgage loans are secured loans which are secured by collateral that can be taken away.  Thus it is imperative to not be delinquent on these payments to prevent the collateral from being taken away.  Car repairs get priority because transport is essential to ensure that you get to work on time.  You don’t want anything to jeopardize your new job.  Next prioritize all the other expenses.

Pay off debt : Pay off your debt strategically by attacking the highest interest first as it will cost you more. If it makes sense pay your high interest (upwards of 20%) credit card debt by looking into peer-to-peer lending like Lending Clubor Once you have made a couple of payments give your creditors a call.  Talk to them and enquire if they would be willing to take your delinquency off the record if you pay everything back.  Given the number of defaulters in recent times they might be willing to give you a break if they can recoup their money.

Replenish your emergency funds : While immediate debts and expenses will definitely occupy your mind, don’t forget rebuilding your savings either.  There is no guarantee when an emergency might occur.  First target rebuilding your emergency fund even if you can only set aside $50 a month extra. Try to build back at least 6 months of living expenses or more.

Put your retirement back on track : Also don’t forget to max. out you retirement funds.  That will help you build your nest egg while also reducing your tax burden.

Rebuild Your Life

Getting back on track after unemployment doesn’t just involve changes to financial planning but also to your mind-set.

Focus on the good : The constant fear of lay offs has left me with more frustration and negative thoughts about my career and life. I understand that even though it might be natural to feel so, I am not doing myself any good by thinking about it too much. I can only imagine how people feel getting laid off after working for a company loyally for a number of years. But it is time to move on and focus on the good. Be more appreciative of what you have – your family, your home and your health.

Channel the fear to make you stronger : Some people might question this, but one of the ways that I have found to make my fear work for me is to prepare as much as I can for what I fear. If you were not prepared for your unemployment, start preparing now. It might be counter intuitive to start preparing for an unemployment just after getting hired. But this preparation will make you stronger and more at peace with your life.

Change your relationship with money : This might also be a good time to rethink your relationship with money and your possessions. When you didn’t have much disposable income during unemployment – what things made you happy? Was it your expensive flat screen TV or a home made dinner with your family. A lot of times, the things that make us very happy don’t cost much money.

Remember to take a break and splurge in limited amounts at regular intervals.  No one can remain austere forever unless that’s their way of life.  By splurging at regular, planned intervals you can prevent the frustration from building and causing a major unplanned splurge down the road.

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Sheila July 27, 2011 at 12:51 pm

I just found your blog and am excited to read it:)

Financial Excellence July 27, 2011 at 2:30 pm

Good post. I like how you focused on the financial and the mental side of things – nice to see the whole picture included.

Marie at FamilyMoneyValues July 27, 2011 at 5:40 pm

Great advice! I especiallly liked your comments about changing your relationship with money.

101 Centavos July 28, 2011 at 4:01 am

Good post, Suba. Given how unpredictable the economy is, might add a section about planning in case another layoff occurs.

Amanda L Grossman July 28, 2011 at 5:15 am

I was laid off from my first two jobs out of college (am on my third job!). Quite the experience, especially since I can be a workaholic. Both were over the summer time; for the first time round, I was very depressed and it took me weeks to snap out of it. By the second time, I had learned that I will be employed for most of my adult life, so have a little fun with the time off.

One thing that I did do that I think is really important is to get emergency health insurance coverage. Also, negotiate the severance package (if you receive one). Though this is difficult to do when you are shocked and partly crying your way out of the office….

jana July 28, 2011 at 6:54 am

I think the most important points in this are change your relationship with money and new job, new budget. These two definitely go hand in hand. It’s easy to fall back into old habits after you’ve gone through a period of deprivation and it’s easy to splurge. By taking the time to reevaluate and reestablish priorities, it’s possible to recover from unemployment.

Harri @ TotallyMoney July 29, 2011 at 2:18 am

Great posts and tips. I definitely agree that it’s important to re-evaluate whether actually you needed to splash the cash as much as you did in a previous role.

I’d add that congratulating yourself in some way (which doesn’t necessarily involve spending) is important too. Your confidence can plummet when you’re out of work- you deserve a little celebration!

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