Unannounced pink slips could jolt even the most talented professionals. The emotional roller coaster could cause even financially-savvy individuals to make money mistakes they would not have otherwise considered.
Here are some money mistakes you must absolutely avoid:
Ineffective budgeting (and worse, no budgeting)
Internet surveys indicate that nearly 35% to 55% of individuals do not budget at all and a significantly larger proportion either do not adhere to their budget or adapt it to changing circumstances. Almost immediately after a layoff, take stock of all your liquid assets and create a budget that will launch you in “survival mode” for six months to a year. Trim all unnecessary expenses.
If possible, create a temporary source of income. Blogging, temp jobs, freelancing — there are plenty of ways you can earn some extra cash without jeopardizing your job search goals.
Not applying for unemployment insurance
In an ad hoc survey, I found that nearly 55% of the individuals had not applied for unemployment insurance because they thought they “would not qualify for it.” Surprisingly, almost 90% of these individuals had not checked qualifications criteria with their state unemployment office.
Unemployment insurance can be a great backup source for several months. Considering that the average job search time (US market) edges between six months to one year, a little extra help could go a long way.
Not consulting a tax professional
The Tax Code has several provisions that could benefit unemployed individuals. Certain expenses toward your job search may qualify for a tax break. Speak to a qualified tax expert or attorney to adjust your financial goals and tax strategies.
Cashing out on savings before exhausting other resources
Don’t cash out on your savings and retirement assets as soon as you hit the panic button. Your savings must be your absolute last, last [redundancy intended] resort during this time of financial crisis. Unless you are really starving, don’t touch your savings.
Not planning effectively
Create a roadmap for yourself describing all contingency steps you are going to take during the next three months, six months, and one year.
Examples: If I don’t get a job within three months, I am going to share the apartment with a roommate; after six months of unemployment, I will start selling some of my furniture … get the point.
Not mitigating risk (an unemployment account)
If you are reading this article while you have a job, open a separate “unemployment account” where you can deposit a small percentage of your monthly earnings. The goal is to create a “cushion” that will last you several months.
Relying on debt
When paychecks are not certain, piling up debt is the last thing you would want to do. Avoid the temptation of using your credit card even for small expenses. If you use it, try to repay most of the principal at the end of the month. One small error here could cause a ripple effect and create headaches that will only spiral down the road.
Not seeking professional help
If your company has offered you outplacement assistance, take advantage of the free help. Otherwise, seek out your local Career One Stop and get help with all aspects of your job search. An average individual looks for work every four to five years. A lot changes during this timeframe. A little professional help could cut your job search time significantly.
Most importantly, create a support group of like-minded professionals you can network with during your period of unemployment. These connections could really benefit you in many ways.