Surviving Unemployment

Losing your job may be the toughest financial blow you'll ever have to take, yet people do survive unemployment; in fact, they often emerge on firmer financial footing (because they've quickly learned to budget and cut back) and with greater confidence in their abilities. This section shows you how to move from desperation to success.

Sorting Out Severance Packages and Unemployment Insurance
Your first step should be to assess how much money you may still have coming in — usually from two sources: Severance pay (a lump-sump check from your employer) and unemployment insurance.

Many companies don't offer severance packages, so its' certainly not guaranteed. If the company is laying off employees because it is having financial difficulties, you probably wont' be offered any severance pay, but you may be offered a severance package that might include job-placement assistance, continued use of an office so that you still appear to be employed, and freelance opportunities to finish projects that you've been working on. This assistance is not common, however.

If you are offered severance pay, the amount will most likely be based on how long you've worked for the company: A months' pay for every two years worked, for example. If you're offered this pay — six months' worth of income, say — immediately put it away in a safe, interest-bearing account so that it will last you six months (or, perhaps, even longer).

If you're not offered any severance, or if the severance pay is so paltry that it runs out before you've even had your resume printed, you're not alone. Sadly, few companies offer this assistance — those that do are usually companies that have recently merged (and, therefore, have a lot of cash) and have laid off a small part of their staff.

If you were fired from your job because of misconduct, unemployment insurance and COBRA-defined coverage will probably not be available to you. These benefits are meant to assist employees who lose their jobs through no fault of their own.
You're far more likely to receive unemployment benefits, however. The moment you hear you've been laid off, call your states' unemployment-insurance agency. While you may have to visit the unemployment office, some states allow you to file a claim by phone or online.

The amount of your unemployment insurance and the length of time you'll receive it is based on how long you've been employed, the state you live in, and the general economic condition in your area. (In times of severe economic downturn, unemployment benefits are often extended for many more weeks than in relatively healthy economic periods.) Your state's unemployment office will know how many weeks you're eligible for and whether you have any chance of having those benefits extended.

As soon as you find another job, your unemployment benefits will stop. Some states, however, have a self-employment assistance plan that encourages you to start your own business. You receive the same benefits as you would if you were looking for work, but instead of sending out resumes and going on interviews, you're spending your time getting your business started. Ask your state whether a self-employment assistance program is available to you.

Locking In Your COBRA-Defined Coverage

The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986 was designed to help employees who leave their jobs and are, as a result, without medical insurance coverage. If your former employer had 20 or more employees, COBRA allows you to continue medical insurance coverage for up to 18 months after leaving your company.

The fine print? Well, it's a doozy. You have to pay the entire cost of your insurance — the portion you paid before (it was probably deducted from your salary) and the portion your employer paid on your behalf, which may have run several hundred dollars per month. (Your former employer is also allowed to charge you a 2 percent administration fee.) The coverage you receive — including deductibles and limits on coverage — should be identical to the coverage you had as an employee.

When you're laid off, you should receive information about continuing your medical coverage under COBRA. If you don't receive it, ask for it! You usually have 60 days to elect to continue your coverage (and when you sign up, the coverage is retroactive to your last day on the job) and pay the first payment. If you fail to make the payments, which are usually due monthly, the coverage will be terminated.

Before deciding whether to accept COBRA coverage, call around or search on the Internet for short-term health-care coverage. If you're willing to go with a high-deductible plan (which means that you don't get any benefits until your medical expenses total a ridiculous amount, but you're covered up to a few million dollars if a catastrophe occurs), you may be able to pay hundreds less per month for insurance and still have coverage if a catastrophe occurs.

It's no small irony that when you can least afford to pay the entire portion of your medical insurance costs, you have to, in order to continue your coverage. However, if you're tempted to just go without insurance, don't! Doing so may turn a bad financial situation into a catastrophic one.
Many conditions, including pre-existing ones and pregnancy, aren't covered (or aren't covered until a year after the policy begins), and a few of these policies can't be renewed after they expire (usually in six to nine months).

COBRA's biggest benefit could be that even though it expires 18 months after you sign on, if you still haven't found work, you're eligible for insurance policies that aren't allowed to exclude pre-existing conditions.


Seeing to Your Other Insurance Need
If you're able to lock in COBRA insurance for the next 18 months, you have one major insurance need taken care of, even if it is frighteningly expensive. But you want to think about your other insurance coverage as well, especially insurance that may have been covered by your employer and insurance that you may be tempted to let lapse while you're unemployed.

Employer-Sponsored Insurance

Your employer may have paid for life, disability, dental, and vision insurance, in addition to medical coverage. Of these, life insurance is the one that's most important to secure while you're unemployed.

Some people think of life insurance as a way to leave great wealth to their children or spouse upon their death, but for most people, life insurance is simply a way to help your family pay for funeral costs and get through a year or so without your income.

Many people, therefore, buy enough coverage to pay funeral expenses, pay off the mortgage, and pay for one or two months of income or unemployment benefits. Funeral expenses vary by area — call your local funeral home for an estimate.

You can find out your mortgage balance by calling your mortgage lender and asking for the payoff amount. Use WORKSHEET 12-1 to see how large your life-insurance policy should be.

WORKSHEET 12-1

Amount of Life Insurance Needed

Funeral expenses:

$

Mortgage payoff:

$

Monthly income or unemployment benefits:

$

Other amount needed:

$

Other amount needed:

$

Other amount needed:

$

Other amount needed:

$

Other amount needed:

$

Insurance You've Been Paying For

Your employer has probably had nothing to do with your homeowner's or apartment insurance and car insurance. When you're unemployed, you want to keep those insurance policies intact, although this is a good time to shop around for a better price and, if necessary, higher deductibles.

You may also have had a retirement plan at your company. For now, don't feel that you need to do anything with this plan, unless you think your company might be in danger of declaring bankruptcy. Otherwise, let it sit until you've had a chance to figure out your next move.
Most states won't allow you to let your auto insurance lapse (they'll eventually take away your license plates), and most lenders won't allow you to let your homeowner's insurance lapse (they'll cancel the mortgage and force you to sell your house).

Although this may seem intrusive on their part, consider what would happen if you had a fire in your house and didn't carry insurance. The mortgage company wouldn't have a house to sell in order to recoup their loan, so they would make you pay that loan in full immediately.

Don't let unemployment go from bad to worse by not maintaining some insurance coverage for your house and car.

Paring Your Expenses Down to the Bone

Now that you have a sense of what your income might be for the next few weeks and have discovered the cost of paying for your insurance policies, you can create a bare-bones budget that you'll live on until you find your next job.

Your next step is to eliminate every single unnecessary expense so that, even with the increase in medical insurance payments (and, potentially, other insurance premiums, too), you can make your unemployment insurance (plus any savings you may have) last as long as possible.

This is your time to experience living like a monk. Unless you can show directly how spending money will get you another job, put away your credit cards and begin a period of absolutely no discretionary spending.

If your company offers job-hunting assistance, use it, even if it's not the greatest service or assistance available. If nothing else, beginning your job hunt the day after you are laid off doesn't give you much time to worry or get too angry.

Both emotions are, of course, perfectly normal reactions to losing your job, but both can also paralyze you. Take the time you need, but if you find yourself unable to get out of bed or unwilling to get off the couch, you may be letting your emotions keep you from getting that next interview.

Looking for a job — especially if you use an office or other location (away from your home) that's been set up for you — gets you out of the house, dressed professionally, and ready to look for your next course in life.

In fact, that's often the best approach when job hunting: Treat your job search as though it's your full-time job. Use any facilities your company has provided for you, which may include office space with a telephone, copy machine, computer and printer, resume consultation service, and so on.

If, on the other hand, you aren't offered any job-searching assistance from your company, you can use the same ideas to find your next job.

If you don't have a top-notch resume and don't have access to any free services that offer resume assistance, take a trip to your local library to review its books on resumes and cover letters, especially those that discuss the best ways to submit them electronically.
If you need to get out of the house while searching the Internet or newspapers, visit your local library or the FedEx Kinko's copy center in your area. When you do go out, dress professionally and set goals for the day, such as, “I'll find and follow up on three leads today.”

WORKSHEET 12-2

A Bare-Bones Budget

Monthly Expense

Amount

Ways to Reduce

New Amount

Groceries and household items

$

$

Day care

$

$

Contributions

$

$

Savings

$

$

Rent on furniture or appliances

$

$

Entertainment/babysitting

$

$

Eating out

$

$

Rent or mortgage

$

$

Car payment or lease

$

$

Electric bill (average)

$

$

Gas bill (average)

$

$

Water bill

$

$

Sewer bill

$

$

Trash pick-up bill

$

$

Cable/DSL/satellite bill

$

$

Telephone bill

$

$

Cell phone bill

$

$

Bank charges

$

$

Haircuts/manicures/pedicures

$

$

Home equity loan

$

$

Other loan

$

$

Credit card or store-charge bill

$

$

Credit card or store-charge bill

$

$

Credit card or store-charge bill

$

$

Credit card or store-charge bill

$

$

Credit card or store-charge bill

$

$

Credit card or store-charge bill

$

$

Child support or alimony

$

$

Car maintenance

$

$

House maintenance

$

$

Auto insurance

$

$

Property taxes

$

$

Gifts

$

$

Events to attend

$

$

Clothing and shoes

$

$

Home insurance

$

$

Vehicle registration

$

$

Vacation

$

$

Club membership

$

$

Club membership

$

$

Club membership

$

$

Other:

$

$

Other:

$

$

TOTAL:

$

$

Never pass up the opportunity to network! Although you may prefer that people not know you've lost your job, the people you run into at the coffee house, your daughter's basketball game, or a social gathering with your spouse may be able to help you find your next job.
When searching online, search first for job-listing services that are specific to your industry. For more general searches, go to Monster.com, Yahoo! Hot-Jobs, CareerBuilder, and craigslist.

Also, don't forget the classified ads in and website for your local paper.

Starting a Consulting Firm or Small Business
Many laid-off or downsized employees use their misfortune to springboard into a career they've always wanted, as a consultant or small business owner. There are, however, some important points to consider.

Wait to Pursue Big-Business Dreams

If your plans for a business are large in scope — say, you want to open a retail store or open a large consulting firm — being unemployed may not be the best time to establish your business. For a large business that's going to have a lot of overhead (rent, inventory, equipment), you're going to need money, either from a lender or from investors.

Unless you received a large severance package or have plenty of money in savings that you could give up as collateral (a guarantee for the lender), you're probably not going to qualify for an influx of cash from a lender or investor while your future is so uncertain. That doesn't mean your big-business plans are impossible, but you'll have a better chance of success if you keep your plans small.

Keep Your Plans Small

Concentrate your self-employment plans on the lowest-overhead business that appeals to you.

Plan, for now, to be the only employee (or work with a few other self-employed professionals who also have their own businesses), so that you can eliminate complicated withholding taxes and paperwork and can work out of any spare space in your home.

Keep your overhead to a minimum, buying only the items that you absolutely need to run the business. (You can purchase more for your business later, as it grows and prospers.)

Considering Another Geographic Location

If you're struggling to find work in your immediate area, you can always expand your prospects by branching out into another geographic area. This sounds simple, right? Unfortunately, it isn't.

Finding out about out-of-town positions is easier than it has ever been, thanks to the Internet. Actually landing the job, however, can be much more difficult. In general, employers in other geographic locations find that out-of-towners are expensive to hire and often flee back to their home area the first chance they get.

To make yourself a more attractive candidate in the eyes of an out-of-town employer, consider the tips in the following sections.

Job-searching websites are easy to use and list thousands of jobs (usually by the dates they were posted, so you always know how hot the lead is). If you're interested in taking on work nearly anywhere in the United States, make a point of checking these sites every morning, searching by city, if possible.
Clarify That You're Not Expecting Relocation Assistance

The main fear of out-of-town employers is that you're going to expect relocation assistance if they offer you a job.

That assistance can include the costs of house hunting in advance of the move, the move itself, help selling your house (including, but not limited to, actually buying your house from you if it doesn't sell), help finding employment for your spouse, paid trips back to tie-up loose ends, and so on.

These costs can be incredibly expensive even for large companies, so put their mind at ease by indicating in your cover letter that you're planning to pay for your own move and will not require any relocation assistance.

Say You'll Pay for Interview Expenses

If you were happily employed and had the leisure of weighing out-of-town job options, you might expect to be flown out for an interview. But given that you want to find work immediately, mention in your cover letter that you plan to pay for your own interview expenses (driving or flying out, staying in a hotel, paying for meals, and so on).

One way to get out-of-town employers to respond quickly is to let them know that you'll be in the area on a certain date — say, four or six weeks out — and that you'd like to set up an interview at that time. This gives the company a chance to see you in person, but it also forces them to interview you on a timely basis.
Indicate That You're Moving Regardless

Even if you aren't planning to move without a job, make your cover letter sound as if you're definitely relocating to the area and are looking for employment in advance.

This, combined with your readiness to pay for your own interview and relocation expenses, may make you as attractive as an in-town candidate.

Be sure to mention all of the non-work-related reasons that you're moving to the area. (Hint: Make up some of these reasons if you don't have any!)