Loss of Job.
Steps to help you to prepare for the inconvenience.
Here are some actions you should take to prepare for it:
A. Build your emergency fund cash reserve.
An adequate cash reserve enables you to handle the unexpected, so you don't have to dip into your long-term investments. The rule of thumb: Set aside enough money in an emergency fund to pay for three to six months of living expenses in case you lose a job or go through any other financial crisis. If you are self-employed or face poor job prospects in case of a layoff, it would be better for that cash cushion to cover six to 12 months. But no matter what you have set aside, add to it regularly.
B. Look for insurance policies.
Some life and disability insurance policies have riders that waive premiums if you are unemployed. A waiver enables you to keep your important insurance protection in force, even when you may be unable to make premium payments. Check your policies to find out if a rider is already included. If not, discuss your options with your insurance’s agent.
C. Scrutinize your monthly expenses and overall budget.
Look at everything with a critical eye. Decide what's really necessary and what's discretionary. You may naturally spend less by not commuting (no cost for parking and gas) and eating fewer lunches out, but these budget cuts won't make up the income gap. For example, you may be able to reduce cable TV and internet services, switch to a less expensive grocery store and obtain better rates on your auto and homeowner's insurance coverage and so on.
D. Apply for unemployment benefits.
Unemployment benefits (also known as unemployment insurance) can help stretch out the time that your dollars will last, so apply right away. Benefits won't be paid until you start the ball rolling. In most states, you can apply at the local unemployment office or online, making it convenient and fast.
• Mailing address and telephone number
• Social Security number
• Driver's license number
Unemployment benefits are generally available for up to 26 weeks, but recent changes resulting from the American Recovery and Reinvestment Act of 2009 (ARRA) or the economic stimulus package Homeownership and Business Assistance Act of 2009 have extended benefits by as many as 53 additional weeks, depending on the state in which you live.
• A tax break — the first $2,400 of unemployment benefits collected this year will not be subject to federal income tax.
Remember that taking severance pay, temporary work or retirement payouts may disqualify you from receiving others tax benefits, so make sure you carefully consider your options.
E. Prepare to pay taxes.
Because taxes generally need to be paid on unemployment benefits so money is not automatically withheld to cover them, you'll need to set aside an appropriate amount to pay your taxes later. Depending on your circumstances you may need to make estimated tax payments.
F. Secure health insurance
If you currently have health insurance through your employer, a federal law known as "COBRA" entitles you to continue receiving that coverage at your own expense for up to 18 months at group rates upon termination of employment. Plus, as a result of ARRA, individuals involuntarily terminated from their jobs between Sept. 1, 2008 and Feb. 28, 2010, and who elect COBRA, can benefit from an employer subsidy equal to 65% of the premium for up to 15 months.
Note: Your employer is obligated to provide you with an election notice to enroll in COBRA coverage. This notice will inform you of the date your COBRA coverage is effective, when it ends and the cost.
And do not forget that we are here to help you at any time in any circumstances.