My friend was laid off in September and has yet to find a job as the end of November is rapidly approaching.
"What should I do? Am I going to be okay?" she asked in her car, as she dropped me off for the night. (This is after broke, laid off ex-colleague #2 sped off with a parking ticket flapping from under his windshield, which was highly amusing and ironic.) I looked at her and answered back with brutal honesty: "You're going to be completely fine."
You all are. With Citigroup's recent announcement yesterday that they were eliminating another 50,000 jobs, law firms folding right and left, and unemployment over 6% in the United States, any of us could be wiped clean from our organization's payrolls in a second. For all you Grey's Anatomy fans out there, being laid off is as instanteanous and jarring as Erica Hahn performing cardiothoracic surgery one minute and then leaving Seattle Grace for good the next, minus all the McSteamy drama to cushion the blow.
So, to quote my friend, what should you do? On the jobs front, all you can do is keep applying to as many openings as you can and stay on top of interviews and callbacks. Don't take it personally if you never hear back after submitting your cover letter and resume -- it's not you, it's the economy. Seriously.
On what to do on the finance front after you've been laid off, SmartMoney Magazine wrote a fabulous article with tips on staying afloat:
- Negotiate. While not required to do so by law, many employers offer laid-off employees severance packages. Typically, these packages are on the table for a limited amount of time. Pay is usually based on the employee's length of service. (One employee may qualify for an amount equal to two weeks of salary while another, for as much as a year's worth.) The good news: Employees, especially those who've been at the company for many years and have a stellar service record, can often negotiate a better deal.
- File for unemployment benefits promptly. Even while receiving a severance package from your employer, you're entitled to unemployment benefits. Just make sure to file for those benefits right away because once you apply, there's usually a few weeks lag time until the first check arrives.
Depending on the industry you worked in or the circumstances of your layoff, extended benefits or subsidized training may be available to you through a government program called Trade Adjustment Assistance (TAA). The TAA assists those who've been laid off due to increased imports from, or shifts in production to, other countries, says Maurice Emsellem, public policy director at NELP. Lose your factory job because the company moved its manufacturing facilities to China, and you may be entitled to up to two years of subsidized retraining and up to 52 weeks of extended unemployment benefits, according to the Department of Labor.
- Access health-insurance options. If you can't join your spouse's employer-sponsored health plan, consider either extending your previous coverage through COBRA or buying an individual policy.
Under COBRA, workers keep the coverage they had through their employers without worrying about getting turned down due to illness or a pre-existing condition. This option is pricey, though: You'll pay the entire premium plus a 2% administrative fee, which for a family, could top $1,000 a month. If you're the head of a family or middle-aged, for example, and have higher use of medical services, then COBRA would make more sense.
If you're young and healthy and just want coverage for medical emergencies, then look into private insurance. These health plans have lower premiums — on average $344 a month for families and $148 for individuals — but carry much higher deductibles.
- Tap into your 401(k). You're out of a job, have bills to pay and your savings account is dwindling. Your 401(k) might be calling your name, but tapping into the retirement account should always be your last resort.
Beyond the fact that you're dipping into your nest egg, the biggest problem here is Uncle Sam: Say a laid-off worker in the 30% tax bracket withdraws $10,000 from his tax-deferred retirement account. Not only will he pay $3,000 in income taxes, he'll also pay a federal penalty of 10%. Once everything is paid out, he'll be left with just $6,000 in spending cash, the article states.
- Overuse your credit cards. Interest rates alone should be enough to keep people from using their credit cards too much. If a payment is late — even by one day — your card issuer may jack the interest rate up to 20% to 25%, says the article. Credit-card companies are also tightening lending standards and lowering credit limits for high-risk cardholders, which makes it that much costlier should you get into the habit of overcharging. If you're desperate for cash, take money out of a standard savings account or taxable investment account, such as a stock portfolio, before turning to your credit cards or 401(k). [SmartMoney Magazine]