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Taking care of all your bills can be challenging enough, even during the best of times. Your personal finances, however, can quickly become impossible to manage should you lose your job.
According to labor force statistics for the month of June provided by the Department of Labor, 4.4% of the country’s population is currently unemployed.
While 4.4% is a much lower rate than what was seen during the severe economic downturn of 2007-2009, when unemployment climbed to an average rate of 10.8% nationwide, millions of Americans continue to lose their jobs each week.
While many parts of the country have begun to recover from the recession, others continue to remain mired in economic uncertainty due to rising costs and stagnant growth.
The following are a few strategies to help you gain better control of your finances and survive should you lose your job or experience other loss of income.
Apply for Unemployment Benefits
If you’ve lost your job through no fault of your own, it’s likely that you will qualify for unemployment benefits. These payments replace a portion of your lost wages and can ease the financial burden that is created by losing income.
Even if you are unsure whether you qualify, it really is best to apply for benefits as soon as you learn that you are losing your job, as many states have time limits and other restrictions that can affect your ability to receive the compensation that you deserve.
For example, Oregon unemployment laws typically require a waiting period of at least one week from the day that you first file your unemployment claim, with benefits typically beginning to be paid by the third week of unemployment.
Consider Alternatives Before Cashing Out Your 401(k)
Before raiding your 401(k), IRA or other retirement plan to pay your bills, you should be aware that doing so will increase your gross income for the year, leading to a higher income bracket for tax purposes.
You will also face hefty tax penalties for early withdrawals. This, and the fact that it makes it much harder to reach your retirement savings goal, is why most financial experts recommend that you leave your retirement funds in place and look for other ways to replace your lost income.
What Can You Sell?
One way to replace lost income is to sell at least some of your assets that you seldom use. For example, if you have a second vehicle that mainly sits unused in your driveway, why not sell it? This will generate extra cash, and cut down on expenses, since you no longer need to pay to insure it.
Other assets to sell include gently used electronics, books, and clothing, which can be sold online, or in a yard sale or consignment shop.
Consider Temporary Work and Side Gigs
In a perfect world, you should be able to quickly find another job at the same or higher rate of pay, but this scenario simply isn’t realistic in today’s labor market.
During the last recession, for example, trends in long-term unemployment show that nearly 32% of those who were unemployed remained so for longer than 52 weeks, the highest rate that has ever been reported for this segment of the workforce.
This is one reason why you may find it easier to return to the workforce and resume earning a steady paycheck by applying for temporary positions or internships.
Temporary work not only helps to increase your income, it expands your network of contacts and can help you get your foot in the door at companies that only hire full-time workers after a trial or temporary period.
Another way to raise some cash is to turn a skill or hobby into a side gig while you continue to look for full-time employment. You may even be able to generate enough income to turn your part-time hobby into a full-fledged business!
Don’t go shopping and splurge as a means of cheering yourself up when you lose your job. Look for ways to reduce expenses and preserve your cash to pay important bills such as your mortgage or car payment.
Stop eating out and look for frugal ways to shop and prepare low cost meals at home. Call service providers for your Internet, phone, and insurance and ask about ways to save. Cut back on concerts and other pricey forms of entertainment.
These tips are only a few of the ways you can stretch your income to make ends meet. By following these tips, you can survive, and even thrive during a difficult time of unemployment.
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