It doesn't matter if you were fired or laid off, whether you saw it coming or were completely blindsided: Losing your job is disorienting. You'll feel like you're in a fog. And yet, in that fog you still need to answer some important questions:
How will you pay rent? Put fuel in your car? What about your loans?
In an earlier article, we offered tips on what to do if you are planning to quit your job. But losing a job is a different ball game. This article should help.
The average length of unemployment can be at least 22 weeks, according to some studies, so it's important to quickly adapt your finances to your temporary new normal.
Working through these tasks in the first few days can help you find your financial footing as you figure out the next step in your career.
DAY 1: APPLY FOR UNEMPLOYMENT
Applying for the next job is a critical piece to getting back on your feet.
Get on LinkedIn, get in touch with HR managers and ring your circle of friends and acquaintances soon after you lose your job. The process can take a few weeks, so don't delay.
DAY 2: ASSESS YOUR SAVINGS
Take stock of what you've squirrelled away over the years. How far will it get you? Factor in any severance or payouts for unused vacation days, which will help you stretch your reserves.
In an ideal world, you'll have enough savings to get you through a few months. In reality, you may only have a few weeks' worth. Prioritising bills and cutting back spending can help stretch that (more on that below).
Your PF might look like a lifeline, but resist the urge to cash it out. That will vanish in no time. Consider that a last resort, and you're not there yet.
DAY 3: STRIP DOWN YOUR SPENDING
As soon as you lose your job, you should switch to an emergency bare-bones budget. That means cutting nonessentials, including gym memberships, ride shares, cable, streaming services and other subscriptions.
These changes feel extreme, but they're only temporary. You can readjust your spending once you find another job.
DAY 4: CALL YOUR CREDITORS
Contact any lenders, utility companies and credit card issuers that you owe money. Many will have options to help out, including reducing or suspending payments. The key here is to be proactive.
It's definitely taken into consideration when a borrower reaches out first. It can change the entire conversation, according to experts.
DAY 5: PRIORITISE FINANCIAL OBLIGATIONS
You may need to make some hard decisions if you don't have enough money to go around. But how do you decide what gets paid and what doesn't?
Your top priority should be on making rent, keeping the lights on, putting food on the table.
Debt comes next. Prioritise collateralized loans, like your mortgage or auto loan. Defaulting on those could lead to losing your home or car.
With credit cards, continue to make at least the minimum payment for as long as possible. Missing payments will damage your credit score, which can take years to rebound. And you may need your credit cards to cover expenses down the road.
Remember: Talk with your creditors, especially if you need to miss a payment. You'll have more control over the situation if you keep them in the loop.
This is an AP article that has been modified for the Indian context.