Dealing with job loss or job uncertainty can take a huge toll on mental and financial well-being. As a result of the recent government shutdown, some Americans are experiencing the effects or possibility of an unplanned employment gap. The American Institute of CPAs (AICPA) has tips for those who have been directly affected.
“Job loss and uncertainty can feel paralyzing, but it can also be a catalyst,” says Dan Snyder, CPA/PFS, Director of Financial Planning at the AICPA. “Setting immediate priorities and a workable a plan for current essentials can lessen some of the stress in times of furloughs or job uncertainty.”
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Financial planning experts at the AICPA recommend the following:
Job Loss or Furlough
- If you are a federal employee, use the shutdown assistance map for resources.
- Review your budget or cash flow and prioritize essentials. Categorize your expenses as “needs” versus “wants” to identify where you can adjust your spending. Pause discretionary spending and focus on housing, food and healthcare.
- Evaluate your emergency fund to see how long it will cover essentials.
- If eligible, apply for unemployment benefits. Start by checking your eligibility requirements in the state where you worked. There is no federal benefit program and each state sets its own guidelines.
- If you seek other or temporary employment, consult your employer’s policies before taking on additional jobs. This is especially common in government or public-sector employment, where specific ethical rules and regulations are in place to prevent potential conflicts of interest.
- Evaluate sources for cash flow such as home equity or unsecured lines of credit. Another source of cash is a loan from your federal Thrift Savings Plan, much like a loan from a 401k plan. Some of these options have downsides including potential double taxation so evaluate your options carefully.
- Communicate with your creditors if you are struggling with payments. Some financial institutions offer assistance in the form of payment deferrals, loan modifications and other types of assistance. There may also be specific assistance available to federal workers.
Ahead of a Job Loss
- Shore up resources – an emergency fund. Sudden unemployment is exactly what an emergency fund is made for. Take any extra income and use it to pad your emergency fund. A good goal is to have enough money to cover between three and six—or even nine—months’ worth of expenses. Start small with a manageable minimum weekly contribution, then add more whenever possible.
- Manage spending with a month-to-month budget. Establish a current view of your income and how much of it is absorbed by obligations like rent, mortgage and car payments.
- Use credit cards cautiously. Unpaid balances that grow with high interest charges, along with an income interruption can be a “perfect storm” of financial distress.
- Start networking. Stay ahead of the situation and start networking in your industry now so that if you do lose your job, you’ll have others who know you to help you find a new position.
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