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Losing Your Job Without Losing Your Shirt

Nobody is immune from sudden job loss anymore, and everyone should be prepared for the possibility. If your finances are in order, you’ll be better able to avoid being plunged into unmanageable debt caused by job loss and will be less likely to accept a job you’ll end up hating. You can be prepared without being paranoid.

Determine Where You Stand Financially

Assess your financial situation BEFORE the need arises. Many people avoid making a list of their assets and debts because they’re afraid they won’t like what they find, or they believe they have a good “gut feel” for their overall financial picture. But ignorance is not bliss, and will only hurt you in a time of financial crisis. So, the first step in preparing for a possible loss of income is to prepare a snapshot of your financial situation, or net worth statement.

Get a Feel for the Stability of Your Job

How are your employer’s competitors doing? Are they experiencing lay-offs? This can be a good indication of the stability of your job. If job lay-offs have already occurred where you work, you should have your resume updated and be looking around for possible opportunities that fit your skills. About.com’s Job Search Guide, Alison Doyle, has tremendous resources to help you write a winning resume, find a new job, and ace the interview.

Know Your Employer’s Job Severance Policy and Other Benefits

Acquaint yourself with your employer’s severance policy now. Do laid-off employees receive severance pay? If so, is it based on years of service or some other criteria? Knowing how much you could expect if you’re laid off helps you calculate how much you need in your emergency living expense fund. Also educate yourself about whether you’ll be allowed to continue your health insurance benefits under COBRA if you lose your job.

Establish an Emergency Fund

More than ever, in these uncertain times, everyone should have an emergency fund equal to six to eight months of expenses. How will you know how much your fund should be unless you know what your monthly expenses are? Here’s where a budget comes in handy.

If the Worst Happens

Job loss will be much easier to deal with financially and emotionally if you’ve prepared for the worst by following the advice above. If the worst does happen, here are additional tips for getting through a period of job loss:

* If you’re fortunate enough to receive severance pay, use it as a bridge to get you through your period of unemployment. Spend it carefully, paying the most important things first: rent or mortgage, car payment, electricity, groceries, etc.

* Apply for Unemployment Insurance immediately. By waiting, you may reduce your benefits.

* Resist the urge to use your credit cards unless absolutely necessary for critically important expenses.

* Contact your creditors (credit card companies, etc.), tell them you’ve lost your job but are actively seeking employment, and request an arrangement that allows you to make token or reduced payments for a limited time.

* Organize your job search. About.com’s Job Search Guide has an excellent “Job Search Toolkit” that summarizes what you need to do.

Besides the financial aspects of losing a job, there are usually emotional aspects. You’ll find good advice about thriving during job loss and job search at ThriveNet.com.