Maintaining financial stability after a job loss
EMPORIA, KS -- Reassess your financial situation: Review your recent bank statements, current portfolio and upcoming financial obligations. Then, prioritize future spending. Maintain momentum on key financial goals. Be sure to make saving what you can a good habit. Understand your severance package: Your deal may include several paychecks, reimbursement for unused paid-time-off, sick days, or stock options, among other possible sources of income. Consider reviewing the terms with a trusted attorney or financial professional.
Use your emergency fund: If you have a healthy emergency fund, give yourself permission to dip into it. It can be challenging to watch money flow out after diligently building your savings, but doing so can help you meet financial obligations. Avoid dipping into your retirement accounts: It's important to maintain your dedicated savings. Borrowing or withdrawing money from a 401(k) is taxable, and will also incur a 10% penalty fee. You could also miss out on months worth of compounding and potential market growth that can be challenging to make up.
Consider tax implications: Losing a job - and finding a new one - can affect your taxes. Severance pay, unemployment compensation, payment for accrued vacation or sick time and other financial benefits from your employer may be taxed. On the flip side, costs related to your job search are often tax deductible. Consult a tax professional who can help you determine what to expect for this year's tax return.