By Diana Palmieri
It seems everywhere you turn, someone knows somebody who got laid off. This is not uncommon, especially with the unemployment rate hovering around 10 percent for the past two years.
About eight years ago, my husband got laid off from his job two weeks before we were set to close on a house (and, thankfully, he had another job three weeks after we closed). Prior to that, when we lived in our first apartment together many years back, he lost his job just three months after we moved in. He did not find a job for eight months. I know what it’s like and remember those feelings of angst, but we pulled together and got through it. I also told my husband we aren’t moving again because that seems to be the kiss of death.
You can survive a layoff; you just have to be alert and on top of things. Let’s start with three ways to be proactive: Benefits, Healthcare, and Budget.
Benefits
Obviously, the first step is to apply for unemployment benefits. You can go down in person to your state unemployment office or apply online or over the phone. You will need to give some specific information about yourself; after approval, you usually receive a payment within two to three weeks. This can continue for 26 weeks and can be extended; if you are out of work longer you can apply for Emergency Unemployment Compensation (EUC). Contact your state unemployment office to find out about these extended benefits.
Healthcare
Find out about your healthcare benefits and what your choices are. You may be eligible for COBRA (depending on the size of your company and active participants within the plan) or to add yourself onto your spouse’s insurance. COBRA can be very expensive as you pay your share and the employer’s share of the insurance, along with an administrative fee.
There is also catastrophic insurance, which covers major medical (think surgeries or a hospital stay) but not routine care. The premiums are low, but they don’t cover pre-existing conditions and have higher deductibles. I also found a Web site sponsored by the Foundation for Health Coverage Education (coverageforall.org), which offers information on different programs within your state. If you do not have coverage and God forbid something happens, you can always ask the medical facility treating you for financial assistance.
My husband did not have any coverage when he was out of work many years ago and–you guessed it–had to go to the ER. He cut his hand open on a knife and required stitches. Thankfully, it was not that serious, but still we spent money we did not have. We applied for assistance through the hospital and they covered the entire bill.
My brother had a more severe issue. He, too, was out of work when he suffered from chest pains about two years ago (thankfully he was fine). He spent the night in the hospital with no benefits and ended up with quite a bill. I told him to go down to billing and explain his situation. Although they did not cover his entire hospital stay, they worked out a plan that included several discounts and a payment plan. Today, he is gainfully employed and almost through paying off his debt to the hospital.
Budget
I’ve said the word budget many times, and this would be the most important time to put one in place–ASAP. The average person looking for work searches for about 35 weeks. Start by putting together what money is coming in (think severance, spousal income). Put a list together of all your bills, with priorities at the top. Look for what you can reduce, such as converting your cable “super” package to basic, removing texting and other frilly features from cell phones, or getting yourself on a balanced billing program with the electric company. All of these things add up.
You should also give some thought to what could happen should you be unemployed for an extended time. Take a look at savings, retirement plans, or perhaps an existing home equity line of credit. Keep in mind the following:
• An existing home equity line of credit will require you to make payments immediately; you don’t want to miss a payment and put your home at risk.
• A retirement plan, namely an IRA, if tapped before the age of 59½ will be subject to taxes and penalties. Do your research, and ask your tax preparer about this option.
• Some retirement plans (like a 401K) have the option of taking a hardship withdrawal. Get in touch with the plan administrator to find out the details; there are several definitions of hardship.
• If you decide to lean on a credit card, proceed with caution and choose purchases wisely. Be aware of your APR, and be sure to start paying down this debt as soon as you start working again.
Remember the old proverb “This too shall pass”? I said that to myself every day during those times. Keep the lines of communication open with your family. Talk about what’s going on and what’s being cut back, and remind them that it’s temporary. You need to stick together. Take a deep breath, be proactive, and focus on the future.
The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisory.
Diana Palmieri is dually registered with Vanderbilt Securities LLC and H Beck Inc., which are unaffiliated. Securities offered through Vanderbilt Securities LLC, member SIPC/FINRA/MSRB.