These Financial Strategies Will Help You Navigate Any Job Change, Promotion, or Loss
Due to the pandemic, workers in the United States endured record job loss during 2020. According to reports by the U.S. Bureau of Labor Statistics, a total of 22.4 million jobs were lost in March and April 2020. And you, of course, have to account for additional jobs lost in the months thereafter. Bottom line: A lot of people faced a change in employment last year.
And with job loss comes the very stressful reality of financial uncertainty. The good news? There are some steps you can take to ease the hardship and set yourself up for a rebound. Here's what the experts suggest.
Know your options.
"Before you sign anything, ask your employer to lay out why you are being let go, and get clarity on the separation benefits that you will receive, including how much longer you will be paid, and if you will receive separation pay, what benefits you will continue to receive, and what happens to any additional perks such as 401(k), stock, FSA dollars, commuter passes, life insurance, etc.," says Colleen McCreary, chief people officer at Credit Karma. And know that it's okay to take your time. "When you've just been told you've been laid off, it can be such a shock that it can be difficult to come to the table with these questions, and that's normal. Just wait a day or two and come back with a clear mind to ask questions."
Conduct a comprehensive audit of your finances.
This is one of the very first steps you should take, whether or not you have an emergency savings fund to hold you over, says McCreary. Once you dig into your spending habits, you may be able to see if there are any areas where you can cut back.
Make a plan for your money.
Whether you've been furloughed or experienced a pay cut, the next step, after auditing your finances, is to take action. "It may seem daunting, but make a realistic plan that will help you stay on top of your finances," says McCreary. "Taking a few minutes to sort out any bigger purchases you anticipate or understanding how much debt you need to pay off can help you set a realistic budget." Though you may need to adjust this plan over time, having a jumping off point is key to staying on track.
File for unemployment.
"Unemployment compensation benefits are available to anyone who has lost their job through no fault of their own, and are meant to help you make ends meet until you find a new job," says McCreary. These benefits are typically only a percentage of your salary, so you'll still have to budget for a new normal, but these payments can really help you stay afloat.
Leverage your network.
You'll need to secure a new job, so take the opportunity to reconnect or start a conversation with people in your network, says McCreary. Now more than ever, people understand why you might be reaching out, even if you haven't spoken in a while, but being extra prompt and responsive is very important. "With more people looking for new jobs," she adds, "it's crucial to get started sooner rather than later."
Know that once you're back to work, your strategy will shift.
Thankfully, as the world slowly opens back up, we're finally seeing many of those lost positions filled again. According to reports, June marked a recovery of 15.6 million jobs, or 70 percent of the total 22.4 million jobs lost in March and April 2020. If you just recently got a new gig or a promotion, congratulations on a well-deserved milestone! Here's the tricky thing, though: Even positive job changes require a little action on your part, so once you've thrown yourself a little celebration, narrow your focus on accomplishing the following.
Reassess your budget and what you're putting towards savings.
If your positive job change includes an increase in salary or pay, take the opportunity to reassess your budget. "More income means that you can probably save more money or pay off debt (like school loans or personal credit card debt)," says McCreary. But don't dramatically increase fun money just yet. "If you have any debts to pay off, you should prioritize those payments, as letting debt accumulate can set you back for years to come in the form of higher-interest payments and lower credit scores."
Consider increasing your retirement contributions.
An increased salary marks a great time to optimize your retirement fund. Assess your monthly contributions to an IRA or 401(k) accounts you may have in place, and consider increasing your contributions—especially if you're not maxing out any employer matching program, says McCreary.
Adjust your W-4.
"If your promotion comes with a significant salary increase, it may also come with new tax-related obligations," says McCreary. Visit your accounting department and fill out a new W-4 tax form. Why this is so important: If you don't report your increased earnings, you'll end up paying taxes on your old salary. "This may seem beneficial in the short term, as you'll see more money hitting your bank account on payday, but you'll end up paying for your insufficient tax withholdings when tax season rolls around."
Look into refinancing.
While interest rates remain low, your pay raise could make it the perfect time to refinance your home or auto loan, says McCreary. Talk to your lender to see if it makes sense for your financial situation.