Take the stress out of job loss and turn it into an opportunity with these tips on surviving a job loss
Losing a job is never fun, especially when everything at work seems to be humming along smoothly. Even in the current bull market and with the lowest unemployment rate in recent memory, companies go out of business and downsize payrolls.
Having gone through a recent career transition myself, I speak from firsthand experience when I say you need to be financially prepared to lose your job at a moment’s notice.
I left my old job voluntarily so I could have enough time to job hunt and attend interviews. While my case is a little more extreme than most, it took me nine months to find the job I was looking for!
When I initially turned in my two weeks’ notice, I was expecting to find a new position within three months while we lived on my wife’s income. After month #3 went by with no solid leads, life got more interesting as we had to come up with new ways to survive financially.
The following tips can help you successfully survive after losing your job.
Take the Time to Relax after a Job Loss
Have you ever burnt out at work? No longer having a job can be a blessing in disguise.
During the first two weeks of my sabbatical, I spent very little time planning for the future. Yes, I combed through the job listings and answered emails but took most of the time to just recharge. After seven years of either working the graveyard shift or being on call, it was nice to sit and refocus on life, my skills, and simply enjoy being with my family.
I wouldn’t consider a career transition a vacation, but it’s a perfect opportunity to invest in yourself distraction-free.
Never Give Into Your Fears of Losing Everything
Shortly after leaving your job, you might find yourself waking up at night with what I like to call “money sweats.” You can also feel these same emotions when you’re living paycheck-to-paycheck and don’t know if you will have enough money to last until the end of the month.
“I can’t” is one of the worst statements you can ever tell yourself, unless you thrive on anxiety.
Even though it feels like the chips are stacked against you, optimism is required now more than ever. Being optimistic will help you spot opportunities that a pessimist chooses not see.
Also, staying physically active, eating a healthy diet, and rekindling your interest in a long-forgotten hobby can all be great ways to channel your energy and give “purpose” to your life during this chapter of transition.
Don’t Settle to Survive a Job Loss
One reason why it took so long for me to find a replacement job is that I wasn’t going to take a job that worked nights and weekends anymore. There are plenty of these jobs available in case you are curious.
While my initial inclination was to work part-time at a restaurant or retail store because these businesses are always hiring reliable help, the thought of only slightly more than minimum wage and not being able to take off when that interview finally came was a bad bargain.
Instead, I learned new skills to be a more competitive candidate in my new career field, and I made money with side hustles to ensure we never missed a bill payment during the transition. In fact, one of these side hustles is building into a replaceable income because I had the extra time to make a portfolio of long-term clients!
Tap Your Cash Reserves First, Don’t Touch Your Investments
Why haven’t I brought up money until now? A career transition or losing your job can be more mentally challenging than financially challenging when you prepare to change careers.
While we didn’t expect to use our entire emergency fund, we set aside six months of cash just in case. We also cut our spending as low as possible to make our money last as long as possible.
Think of a career transition as a “mini-retirement” when you solely rely on passive income to make ends meet. When you must live off your assets, spend them in the following order:
- Emergency Fund
- Non-emergency cash savings
- Any tangible assets you can sell for cash like an unused car, boat, or possessions
- Non-retirement investments
- Retirement account investments
Unless your investments are held in a money market fund or something that is easy to get out of, selling investments to make ends meet should be your last resort option. You will need to plan on paying a 20% tax on your earnings and a 10% early withdrawal fee on your pre-tax 401k and IRA contributions (plus any Roth accounts younger than five years).
By cashing out your retirement account, you are theoretically only able to spend 70% of the investment market value. Plus, you’re jeopardizing your future retirement date in the process. We didn’t sell our investments because we knew it was a horrible long-term solution.
That’s why it’s so important to build an emergency fund to afford the unexpected with cash. You have already paid taxes on it, and there are no hidden withdrawal penalties that cut into your profit.
Stay Active Within Your Career Network and Community
Even though you might not be required to get up and be at work by a specific time, you still need some routine. Take time to be active in your local community by doing things you didn’t have time for before, and might not once you begin working again.
This can be a great time to volunteer for a local organization, get to know your neighbors, shadow other professionals, and even meet up with your old friends and coworkers over a cup of coffee. From any of these interactions, doors of opportunity might open up that you never knew existed.
After a few twists and turns, I finally landed a job because of connections I made through networking. Honestly, except the entry-level jobs I worked in high school and college, networking is how I was hired for any “real job.”
Often in life, you realize that “who you know” can be more valuable than “what you know.” If nothing else, connecting with old and new friends can help give you ideas of where to look for a new job, and they can be a reference for when you find a new employer.
A job loss can be a tremendous blessing in disguise. While no transition is without some amount of stress or uncertainty, a positive attitude, creating a new routine asap, and pinching pennies can give you all the time you need to start your next life chapter with your best foot forward. With these tips and a little forward planning, you can not only financially survive a job loss but come out better for it.
About the Author
Joseph Hogue is a financial expert and investment analyst. After serving in the Marine Corps, he started his career investing in real estate before becoming an investment analyst for some of the largest private investors. He's appeared on Bloomberg and on CNBC as an investment expert and has published ten books in personal finance. Now he helps investors reach their financial goals and invest in the stock market with some of the same advice he used when working for the rich.