Laid off To-Do List

Dear Dave,

Could you please give us a list of the things people need to think about and deal with if they've been laid off?

Anonymous

Dear Anonymous,

What a great question! It's good to know you're thinking ahead. Hopefully, you won't have to face this problem, but if you do, here area few ideas to help hold things together.

The first thing you do is take any severance pay, plus all the other money you have, and put it all in an emergency fund. You never know just how long money will be tight in a situation like this. Even if you go out immediately and find a part-time job to tide you over, you're still going to be facing a significant loss of income in the short term.

You know I love beating down debt, but at this point you need to stop paying extra on any debt you have. Yank the plug on retirement planning, too. You don't need to worry about these things when you’re in the middle of a crisis! A bare-bones, detailed household budget is also a necessity. It's beans and rice time, so you've got no business seeing the inside of a restaurant or buying new stuff for a while. If you had vacation plans, put them on hold. Many times people don't want to experience the pain of a scaled-back lifestyle while they're feeling the pain of a job loss. Often they'll turn to credit cards in this situation, and that's a really dumb idea!

Be on the hunt for life insurance, if you previously had it only through your employer. Everyone needs a good, level-term life insurance policy outside of what's offered at the workplace. When it comes to medical insurance, consider using a health savings account (HSA). Look for one with a high deductible and low premium. If you have a 401(k), roll it directly into an IRA with a direct transfer rollover. Do not have them send you a check! Don’t ever cash out an IRA in a situation like this, unless it’s absolutely necessary to avoid bankruptcy or foreclosure.

Finally, you've got to be willing to take any work that comes your way. This means even part-time jobs like delivering pizza or flipping burgers. There's no shame in honest work, and losing a job isn't the end of the world. It just might be the opportunity for a great new career change!

- Dave

Comments and feedback can be sent to feedback@ldsliving.com