Steps to Security After Job Loss

You got a pink slip.  Figuring out the answer to the question, “Now, what?” seems like the hardest job you’ve ever faced.  Take a deep breath.  You can take steps to ensure your financial survival during this period.

1.  Bring your family in on the plan

This is not the time to put on a brave face for the rest of the family. Even the kids need to be part of the discussion of this life-changing event.

“First of all, you’ve got to tell them that things are changing,” says Sharon Danes, professor and family economist in the College of Education and Human Development at the University of Minnesota. “You don’t have to give them lots of detail, but you let them know that mom or dad has lost a job, and what that means is that we’re not able to spend as much money. Younger children may not know what’s going on, but they’re going to sense that something is wrong.”

The next step is to gather everyone around the table and talk about how the family spends money.  Categorize your spending into “needs” and “wants.”  “The “want” spending has to stop, and the “need” spending has to be prioritized.

When you’ve cut back as much as you can, the next step may be to liquidate some of your assets — by having a yard sale or selling a few items on eBay or Craigslist, for instance. You might even consider bartering with neighbors and friends for household repairs and other services that would otherwise eat into your family’s budget.

2.  Manage your mortgage payments

If you are having trouble paying your mortgage, call the mortgage company right away and explain your situation. Ask what they can do to help you out, such as perhaps allowing you to defer payment for a month or two. If you need more time — and more help negotiating — consult a certified housing counselor, whom you should be able to find through a nonprofit credit counseling agency.

Unfortunately, some mortgage lenders may refuse to renegotiate the terms until the homeowner had fallen two months behind.   This will damage your credit, which can actually take you out of the running for any other programs that may be available later, such as refinancing.

3.  Put the credit cards away

More than one-third of Americans do not have any nonretirement savings, according to a recent NFCC survey. With no savings to fall back on, living off credit cards becomes the default system for getting by.

In fact, now that you’re in survival mode and operating under a bare-bones family budget, the only good excuse to reach occasionally for a credit card is to pay for an absolute necessity, such as food. Resist the urge to continue your pre-unemployment lifestyle and simply charge your way through the recession.

4. Commit to saving money

When you are barely making ends meets with your reduced income, it’s hard to even think about saving. But the habit of setting aside some money now — however small the amount — will pay off in the long run.

It starts with making it automatic – there are a number of ways to automatically save small amounts of money. Online banks such as HSBC Direct, ING Direct will automatically take as little as a dollar out of your bank account every month.

If you were one of the many caught with little or no savings when your pink slip came, you are painfully aware of the economic disadvantage of not having a nest egg when a crisis hits.