Prepare For Unemployment? Tips to Bounce Back and Land on Your Feet

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Do you have a Plan B in place if you were to lose your job? Several years ago, a friend of mine lost his job of 10 years when the owner sold the company and the buyer stripped it down by laying off 95% of the employees. It took him 7 months to find a…

Do you have a Plan B in place if you were to lose your job?

Several years ago, a friend of mine lost his job of 10 years when the owner sold the company and the buyer stripped it down by laying off 95% of the employees.

It took him 7 months to find a job, and the only job he could find was outside of his normal career field.

It was a very eye-opening experience, and I know he is not alone. Unemployment is high, and if it doesn’t touch you directly, chances are it will affect someone you know.

My friend’s recent experience got me thinking more about our plans and what I would do in his situation.

Read on to see my financial fallback plan and my best advice for landing another job in the event that you lose yours.

First things first, let’s take a look at what I would do to stay afloat financially:

Our Financial Fallback Plan

Big changes coming for our financial situation. Before I talk about our fallback plan, I need to explain where we are financially.

When I originally wrote this article, my wife and I were going through a huge life change – we were expecting our first child. This was an exciting time for us, and even though the economy was bad, we decided it would be best if my wife quit her job to be a stay-at-home mom.

We have been planning this decision for a long time.

First, we made some changes in our employment situation that resulted in less income, but a better quality of life. We prepared for almost a year to reach that point, then it was another year before we were expecting our first child.

During that time, almost two years, we took some steps to secure ourselves financially:

  • I started a blog which earns us side income.
  • We eliminated all debt outside of our mortgage.
  • We have been living on only one salary and budgeting accordingly.
  • The rest of the money we earned went into our retirement accounts and into cash savings. We have over a year’s worth of savings set aside, so I’m not worried about the short term.

What’s the long-term financial outlook?

Long term, things could be different. After we have our first child, I will be the sole earner for our family.

I have a job as a government contractor that is fairly secure which pays fairly well. In addition, I have a few websites and other online interests with which I earn a fair amount of money (but not full-time income for a family of 3).

As long as life continues as is, then I am confident we will be fine.

However, in our economy, we all know that things can change in the blink of an eye, so having a plan in case it changes for the worse is key.

How I Would Deal With Unemployment

Worst case scenario – unexpected job loss. The worst case scenario would be that I would unexpectedly lose my job. Once my wife resigns from her job in a couple months, we will rely on my job as our main source of income and for our benefits.

Health insurance is expensive, and COBRA coverage would likely be our best option – probably costing around $1,000 per month.

Health insurance coverage is a big reason why losing your job is such a bad situation – your fixed costs spike while your income drops.

I can’t file for unemployment because I earn money from my small business. Since it isn’t an option for me, I would need to start looking for a job immediately and tap into my professional network.

Our fallback plan. Our fallback plan calls for me looking for a full-time job and hopefully doing job interviews while continuing to work on my small business, as well as looking for ways to increase revenues.

As I mentioned earlier, we have a large emergency fund.

But if our savings dwindled too low, my wife could always go back to work and I could stay at home and raise our child while continuing to earn money from my small business. My wife works in the nursing field, and nurses are almost always in demand, so we feel fairly confident that we would be able to get by.

With some flexibility and willingness to diverge from your plans, you can successfully bounce back from a job loss.

We are financially secure – for now

My wife and I feel confident about our current financial situation, but we are well aware that our lives could change quickly. Having a plan in place, though, gives us peace of mind.

Up to this point, I’ve been discussing what my wife and I would do hypothetically if I lost my job.

But I’m going to switch gears now and talk about my real life job loss and how I used knowing I would lose my job to my advantage.

What to Do When You Know You Will Lose Your Job

Losing your job is no fun.

My situation was a little different than many people who experience unemployment, as I was transitioning from an active duty military position and looking for a job in the civilian sector.

Even though it was difficult to be out of work for six months, I felt as though I had an advantage when I entered into unemployment – I knew it was coming.

Now don’t get me wrong, being out of work for six months is tough – I wanted to work, but I couldn’t find a job. It takes an emotional toll on the person who is unemployed and in some cases, finding a job can be more difficult the longer you are out of work.

Not everyone has the luxury of knowing when they will lose their job, but many people actually do have the knowledge they will soon be out of work – and I want to help you prepare for that event.

Whether your job is being downsized, your contract is about to end, or you are voluntarily leaving your position for something else, you need a plan.

Let’s look at job loss in the order of how it affects us and then decide the order in which we should address these issues: financially, professionally, and emotionally.

Financial and Professional Effects of Job Loss

Your financial outlook is one of the most important things to consider when you know you will be losing your job – after all, the reason most people work is to earn money.

Equally important to getting your finances in order is finding your next job.

Read on for the best tips for reviewing and improving your financial plan and securing a new job.

  • File for unemployment benefits. These benefits can help provide financial relief when you lose your job, but keep in mind most people aren’t able to live on unemployment benefits for long before their finances crumble.
  • Build up your emergency fund. Your emergency fund will likely come into play while you are searching for a new job, so you should make it a priority to save as much money as you can over the next few months.

Consider how you might build up a financial cushion in the form of an emergency fund by setting aside money each paycheck in a high yield savings account.

Like unemployment benefits, your emergency fund is unlikely to last forever.

  • Consider discontinuing contributions to your retirement plan. If you have several months to plan for your job transition, you might want to stop making contributions to your 401k or other retirement plans so you can save money for your transitional period.

Most people wouldn’t recommend halting retirement contributions, but it’s all about priorities:

It doesn’t make sense to save money for retirement if it means you will go into debt while you are looking for a job.

  • Reevaluate your fixed expenses. Living modestly and within your means will ensure that you have fewer expenses to meet if you lose your job.

It means making less of an adjustment in the future because you are already adapting right now.

Even if you decide that drastically cutting expenses is not necessary at this point, you can still make a list of items to cut so that you are prepared in the event of a job loss.

For example, go line by line through your budget and determine if there are any areas where you can cut back to save some money each month.

Many people can easily strip $100 or $200 from their monthly expenses by making small sacrifices.

  • Refinance your loans. You may find it easier to refinance loans while you are employed – which could be as big as refinancing your home, saving you hundreds of dollars per year in interest costs, or using 0% balance transfer credit cards to reduce your credit card interest rate to 0%.
  • Update your resume. Having an up to date resume will make it easier for you to start your job search without delay.

It’s a good idea to update your resume at least every 6 months, or with any major change in job title, role, or each time you gain a new qualification.

  • Start your job search immediately. You don’t need to wait until you don’t have a job until you begin searching for a new one.

In fact, sometimes the best time to find a job is when you already have one. It can also become increasingly more difficult to find a job the longer you are without one.

Starting your search as soon as you know you will lose your current job can help you make the transition with little personal interruption.

It can also get you a leg up on the competition – especially if you will be part of a mass lay off in your industry or region and there will be a lot of competition for jobs.

  • Develop Income Diversity. Is all of your income from one place?

If so, it might be a good idea to begin developing a little income diversity.

Consider starting a side business with a hobby as a basis, or setting up a website that can generate affiliate income.

If you are really worried about the stability of your day job, you or your partner can consider getting a part-time job.

You might also consider income investing as a way to begin developing a little income diversity.

While you may not be making a ton of money from these other sources each month, they can establish income streams that can help cushion you if you lose your regular job.

And, as long as you have a job, you can use the extra income to pad your emergency fund!

  • Nurture your network. Your professional network can be an invaluable source for finding a new job if you suddenly find yourself without one.

It’s a good idea to join professional associations, participate in trade shows and events, attend social functions, and otherwise get to know people inside your industry.

  • Keep yourself marketable. In addition to keeping your contacts fresh, you need to stay up to date on the skills you need for your profession.

Consider developing new skills that might serve you well if you need to switch jobs, enrolling in courses or using your newfound downtime to fine tune your skills.

Periodically update your resume, adding any new qualifications, promotions, credentials or titles to it as they emerge, and do what you can to keep yourself valuable to your current employer.

Emotional Effects of Job Loss

You can prepare financially and professionally for losing your job. But in my opinion, it is more difficult to prepare emotionally, especially if you are used to being the “go-to person” at your job.

Even if you don’t associate your job with your identity, you may find it difficult to transition from a role of responsibility to an undefined role.

The biggest issue I had when I was unemployed was going from the responsibility I had in the military to having no responsibility at all.

And it was tough.

My recommendation is to create a schedule for yourself and stick to it so you maintain an order and discipline in your life, which will make it easier to get back into the swing of things when you do find your job.

I found it helpful to get up every morning at the same time and work a few hours on searching for jobs, updating my resume for each position I was applying for.

Other tips which might be helpful include volunteering, working a part-time job, taking classes or working toward a certification, or attending job fairs and networking events.

The key is to remain proactive and positive.

Bottom Line

Losing your job is never easy, but with a concrete plan in place, you can rest assured knowing you’ll be prepared for the worst.

Whether you’re a conscientious planner looking for peace of mind or just got the disappointing news that you’ll be losing your job soon, the tips above can help you to prepare for the financial, professional, and emotional impact of your job transition.

Being smart, realistic, and proactive, you can make your period of unemployment shorter and easier.

Start planning now!

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. Karen says

    I hope this is never something you have to think about, but for people who find themselves suddenly without a job and no insurance, I urge you to look into private health care (Blue Cross, Humana, etc.) If you’re in good health, you can often find comparable coverage for MUCH cheaper.

    For instance, my employer pays my premium, but if I added my husband to the group plan I’d have to pay his premium. It would cost $300 a month to add him to my employer insurance. Instead, we shopped around and found him individual coverage with Blue Cross for $150 a month. The plan is actually better than my group plan in some ways, but half the price.

    I only bring this up because for a long time I was also under the impression that employer provided group plans were cheaper. The truth is, it’s only cheaper if your employer is covering all or a big chunk of the premium.

    Of course, if you have health problems it can be hard to get coverage with an individual plan, and COBRA might be your only option. But if you’re young and in good health, it’s almost always cheaper to shop around for individual coverage.

    • Ryan says

      Karen, thanks for the information about shopping around for private health insurance. I haven’t had the need to look into private health insurance before, but I will definitely look into that should the need arise. I know health insurance is expensive, especially without having an employer subsidize it. Hopefully I won’t need to cross that bridge.

  2. Ryan says

    Wow – exceptional job reducing your debt, Ron! I agree with restocking the e-fund. In this economy, I think that is a very prudent thing to do.

  3. Kristia@familybalancesheet says

    Back in 2006, my husband and I realized the importance of our fallback plan or emergency savings when we hit a rough patch with his business. We had just become parents and I was staying at home. Prior to the baby I worked at his office, but when baby came we hired an employee. Not only did his business turn soft, but he had a health scare that only made things worse. We were not bringing in enough income to cover our biz expenses and our home expenses. Thankfully we were able to cover these expenses with our emergency savings and cutting back on our spending. While we didn’t need to rely on credit cards to get by, we pretty much depleted our savings by the time his biz turned around. We are still working to get the savings back to where it was. Thankfully his biz did turn around and 2008 was his best year so far, but you never know with this economy how things are going to go. Our plan has always been to have a solid emergency fund and if need be I would go back to work to help bring in additional income.

  4. Ron@TheWisdomJournal says

    I feel pretty confident in my job for now. But that’s not to say I couldn’t lose it. My plan B is not as strong I would like it to be, but I do have an option to go back to my last job. It would be a major step back (financially and professionally), but better than nothing. Our non-mortgage debt has decreased in the last two years from almost $75,000 to just over $10,000 so we’ve made significant progress there and eliminated some high interest payments. But all that has come at the expense of our savings. right now, the emergency fund only has about one month’s expenses and we’re feverishly working to re-fund it.

  5. Justin says

    Good post. I enjoy reading this along with my other personal finance blogs daily, and decided to post our plan.

    My household is a single wage earner as well (that would be me) and my wife stays home with our daughter who is almost 2. We are having a bit of a life change as well since we are due to have twins by the end of this month (for those wondering a boy and a girl).

    The company I work for is stable, but layoffs have started in support areas. We are also in the midst of paying off debt and just starting down the debt free road.

    Our plan is as follows (currently): We are saving our tax refund from both Federal and State along with our current savings to make sure we have a cushion. My employer offers a severance package that is about 3 good months worth of income and health insurance.

    Another area is that I’m planning on trying to secure a second part time job once the babies arrive so that in case the layoff does come I’ve got some form of extra income to help brace.

    The third leg to stand on is that I’ve polished up my resume in case of the need of “immediate deployment” and I’ve got bots on Monster and other job sites dropping me lists weekly on job opportunities so that I keep on top of the current local market.

    The best part of our plan is that while both my wife and I don’t want to have me loose my job, we are both prepared for the event if it were to occur. I told her that on the plus side I’d get to have some extra time to spend with the newbies while looking for jobs!

  6. Miranda says

    Great post! Our fallback plan if I lost a major client is for me to look for more work, while living off of our savings. In a worst case scenario, my husband would take time off of school and get a job here in town while I worked on bring in a little more coin from the online world. Turns out we have the lowest unemployment in the country!

  7. frugalcpa says

    My wife plans to stay home when we have kids, too, and my job will never be entirely secure working at one of the Big 4 accounting firms. That said, as with nursing, it’s usually fairly easy to get a job in accounting. Similar to yours, our fallback plan would be for me to find another job through network, and if that didn’t work, my wife could most likely find one and I could stay with our children and consult from home.

    Absolutely worst case scenario is moving in with the parents. I love them, but let’s all pray it doesn’t get to that point.

  8. Jules @ Money Feuds says

    Great job on mapping out a multifaceted backup plan! It is very inspirational.

    My family is in transition right now. My husband is finishing up training this year (under 6 months left), and we are looking for jobs for him. We have our primary residence in one state (where we still have our mortgage for our home), and are renting in the state he is training in. We don’t know where we will be in 5 months so it’s a little tricky! He is looking for jobs, has some options, but the economy isn’t so great, so the options aren’t as good as we saw a year or two ago.

    My current work is fulfilling, but I may need to add some consultant work to boost up our income so we can ride out any bumpy times in the future, especially since we aren’t certain of our employment when/if we move.

    We are working to continue building up our emergency fund and we contribute to our retirement funds each year. But we still feel a sense of worry since we would like to start a family soon (but with transitions we need to consider stability, insurance, etc.). And of course, like everyone else, our home value has decreased, so we need to consider whether to refinance, etc. But since we are away for now, we are continuing to go with the same payments (just to simplify life a little right now).

    Money is tight for us now, but I know much of the world is feeling similar pain, so I shouldn’t complain.

  9. Craig says

    Since I am younger I wouldn’t have the severity of a job loss the way you do, because I am only financially responsible for myself. Although the new blog got started, it’s no where near potential earnings. I don’t have any secondary income but for me a job loss would mean going for interviews and possibly moving back home for a bit to save money.

  10. Steve says

    My fall back plan is to start tutoring more frequently while I search for a new job. I would spend large quantities of time searching for a job, new students to tutor and on my blog.

    To job search and increase the number of students I tutor I would definitely rely on my professional network. Through my current job I have a few coworkers who have strong ties to companies in the area who would vouch for my abilities. A professional network is instrumental for getting back on your feet quickly.

  11. Mrs. Micah says

    I hope I never have to use it, but our fallback plan involves our decent savings, my scrambling to get some extra clients if I’m the one laid off (vs. what I normally take on while I work 40 hours/week), COBRA but looking into self-pay health insurance (much cheaper if you have a high deductible). It also involves my looking into temp agencies (again, if I’m the one laid off).

  12. Kyle says

    Your plan sounds pretty, well sound. I worry about my own situation even though my job is pretty secure. We have at least three months in E-Funds, and both my wife and I work so we would hopefully only lose one of our two incomes.

  13. Ryan says

    Kristia: Thanks for sharing. Glad to hear things worked out with the business and more importantly your husband’s health! your fallback plan sounds like a good one!

    Jules: Thanks for sharing your plan. It sounds like you and your husband have a lot of unknowns, but there is nothing wrong with that. My wife and I were in a very similar situation a few years ago. The best thing you can do is have a little buffer money and remain flexible. You never know what will happen in the next few years, so being flexible will make your life much easier and more enjoyable!

    Craig: being young and not having a lot of expenses can be very liberating because there isn’t much tying you down. Even though a job loss will hurt, you won’t have the plethora of bills dragging you down. It’s also very good to see you working on alternative income streams. I waited until I was 27 to start working on that and I wish I would have started sooner. I might even be doing that for a living now if I had! 😉

    Steve: I agree about the professional network. That can be a lifesaver! It’s also good to look at alternative income streams and try earning money outside your day job. Nice plan. 🙂

  14. Kristy @ Master Your Card says

    I’m pretty secure in my job, as well…for the time being. I work at a credit union, so you never know, but we’ve made money and expanded our business despite the economic conditions.

    That said, I do have a back-up plan. I do freelance writing outside of banking, so I think if I lost my job, I would pursue this option full-time and call in my list of clients. As a freelance writer, I can also become a union member and get reasonable healthcare for less then going it alone. There’s a union fee, of course, but I think it would still be better than trying to pay for an individual policy.

    My emergency fund has about six months worth of expenses currently saved up, plus a little extra for car repairs and the like. My personal savings has about $5k. I’d shift the savings to the emergency fund, just in case, and have pretty close to a year’s worth of expenses saved up. That gives me a little breathing room while I work on building my business.

    So that’s the plan. I have a plan C, too, but I keep that on the back burner. It’s there if I need it, but I’d like to exhaust other options first.

  15. outlaw says

    Working for uncle sam has me in about as secure of a job situation that is possible. Right now my wife does not work but will soon be graduating with a BS in nursing so she should have a job whenever we need one.

    Once I do get out of the Marine Corps I will either go to school and get my degree and we will live of her income and the GI Bill or I will just move into the civilian sector.

  16. DDFD at DivorcedDadFrugalDad says

    We all have a Plan B. The difference is some people have an active plan they created and some have a passive plan they let happen.

    I prefer the active plan myself. I often try to remember that people don’t plan to fail, they fail to plan . . .

    I recommend cutting expenses before a problem, creating an emergency fund now, and having other ways to generate income.

    The last one is important because it allows you to:

    – Avoid having all your eggs in one basket
    – Have stop-gap income protection
    – Sideline or supplemental income
    – Make a career transition
    – Enjoy personal satisfaction

  17. John Hunter says

    Use emergency funds. If I lose my job, try to find a new full time permanent job. Rent out a room in my house. Focus on making money online.

    Look for a temporary job
    – part time job
    – contract work (project based work)
    – a job I wouldn’t want to take forever

  18. Atkins says

    I have a multi-level fallback plan which includes: selling the house and moving to an apartment; reducing the number of cars down to one; eating $1 burgers; foraging in harvested farm fields for fallen grains of corn (gleaning!); picking berries in the forest; imposing on friends; imposing on family; and the biggie . . . moving to a Third World country where my capital from selling the house would go farther.

  19. Jerry Sheehan says

    Yeah, you should plan on unemployment and for the long haul. If you’re job is miserable and you absolutely hate it there especially if you don’t fit in, you should hope for unemployment benefits and make a strategy such as starting your own small business and working for yourself. These are very difficult times and the workplace these days with the corporate cultures, and office politics, etc., can be a very awful place to be stuck in for long days especially in MA. Plan on going back to school along with collecting benefits, etc., is a great idea. It will give you multiple roads to pursue for which you may not have now. And if you’re in financial distress, this is also a great idea.

  20. myfinancialobjectives says

    I agree with Criag, an updated resume is a must. Some people I work send their resumes out every couple of years just to see if they get any interesting offers’.

    I like the diversify income idea as well. I’m working on this right now!

    Also if you think you may get laid off relatively soon, it may not be a bad idea to get a part time job to save up some extra cash for that emergency fund.

  21. Robert says

    I agree with this article and even people with a secure job need to develop a plan for unemployment. The emergency fund is a no brainer. The article mentions living frugally but I take it a step further – I say go into survival mode. Don’t eat out, make only minimum payments, cut expenses every place you can. You can read some extreme stories on the internet about people who manage to live on a very small amount of money per month. The issue is most Americans cannot make a shift like that, and continue to expect to live like they always have.

  22. krantcents says

    All the experts agree that the job search is your full time job and you should spend upward of 40 hours working at it. If you are not, you will prolong the search. There is always something you can do when it comes to networking.

    • Ryan says

      I agree. But it can be tough to network in some cases. For example, I moved to a new location and tried to break into a new career field at the same time. I think that was a major factor in taking 6 months for me to find a job. I was new to the traditional work force and didn’t know much about job searching at the time. Things would be a lot different for me now!

  23. Ben says

    This is such a popular topic right now. I think we have all been there. A few years ago I knew I was going to get fired, but it was because I was coming into work too early and leaving too early, even though I was on a salary job. As long as I got my jobs done it was fine, but my boss was ticked I was leaving by noon every day. I was the most productive person at that job, but she couldn’t see that. I guess its bad to hire an entrepreneur 😉

    Needless to say, I was leaving by noon every day because I was busily working on my own business at home. I was working every day from noon until late at night. I knew if I lost my job, it would be difficult but sometimes cutting the tie with a job will free you up to really excel at your own work.

    I think for guys its harder when it comes to their wife working and bringing in the majority of the money. Even for me being self-employed it would be hard to know that my wife brings in more money that I do, thankfully that hasn’t happened in a long time.

  24. James says

    Ben, Maybe don’t take your boss being pissed personally. Sometimes being at a job means being there during business hours so others can conduct business with you, especially if you work with customers. There may be jobs where you can work at off hours but not many. Yes, it is bad to hire an entrepreneur. They are typically more profitable because they come to work ready prove their worth each day as if in business for themselves, but they make bad sheeple if the employer is looking for people who will stay at a job forever because they “believe” they are dependent on it.

  25. Cherleen @ yesiamcheap says

    The advantage of knowing that you will be losing your job is you know what to do next before the situation arises. You have the opportunity to look for a new job or start with the business you long wanted to put up.

  26. Briana says

    Great advice Ryan. This is happening to so many people now. Sometimes you know, sometimes you don’t. Sometimes you have a few weeks to prepare, and sometimes just a few days. It’s tough but it’s possible to get through it.

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