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How to plan for unemployment
Lisa Smith, Investopedia | March 20, 2009
Involuntarily separated, downsized, terminated, laid off, made redundant, fired. No matter what name you choose, involuntary unemployment is never pleasant. Unfortunately, job insecurity is a fact of life for most modern workers. The best way to deal with this challenge is to be prepared.
Get your job search in motion
Keep in mind that job searches can take a long time. A typical job search will take three to six months depending on the position and the market. If you wait too long to start your search, you may end up desperate for cash and willing to settle for the first offer that comes your way. This could lead to a significant pay cut. While the immediate income will help to pay the bills, the lower salary puts you in a weaker position when looking for your next job - the job that will put your salary back where it belongs.
In a declining economy, which is usually the time for job cuts, the longer you wait to start your search, the more competitive the job market becomes as procrastinators and the newly unemployed join the search. With all of these reasons in mind, it is important to get out and look for a job as soon as possible.
When you need to put your resume to work, reach out to your network. Send a copy of your resume to anyone that might be able to help you find a job. After that, post your resume online. There are a host of popular job search sites, and they are all useful tools.
Treat the job search as a serious task and devote a significant amount of time to it. Finding a job can be a full-time job, but the more effort you put into it, the better your chances of a smooth, quick transition.
Don't touch your retirement savings. You put that money away for your future, and you're going to need it. If you spend it now, it will be gone. To keep up your cash flow, file for unemployment insurance as soon as possible. While unemployment checks won't replace all of your lost income, they will provide some assistance.
Get information about the Consolidated Omnibus Budget Reconciliation Act (COBRA) so that you can extend your healthcare coverage. Obtaining coverage when you are unemployed can be tough, so don't let the opportunity to continue your coverage pass you by.
Talk to your employer about outplacement assistance. The company may provide access to career counselors, telephones, computers and other resources. Lastly, make sure to ask for a letter of reference.
Prepare for next time
It's also important to keep your skills current. If you need a degree, certification or advanced training to take your career to the next level, get it. Maximising your skills maximises your marketability.
Consider taking a second job or opening up a small sideline business. Moonlighting at part-time employment gives you a secondary source of cash flow that can really come in handy if your primary income source disappears. It may even give you a start on a new career path.
Ongoing vigilance is the best defense against involuntary unemployment. By getting your finances in order, keeping your resume and skills current and setting up a secondary source of income, you'll have done all that you can do to prepare for the possibility of losing your job.