This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

7 Ways to Cope When You Lose a Job Suddenly

NEW YORK (TheStreet) -- It seems like we're never really secure. Though the economy is improving and the overall rate of layoffs is falling, Microsoft just announced it is slashing 18,000 jobs, or 14% of its workforce.

The cuts are related to Microsoft's purchase of cellphone maker Nokia, which has had its share of problems. So it would be easy to pass this off as one of those things that means nothing to the rest of us. But since mergers happen in good times as well as bad, and are often driven by the prospect of job-killing "efficiencies," the Microsoft case stands as an object lesson: Even in the best of times, your employment is never completely safe.

So how does a savvy worker prepare for a job loss that comes from nowhere?

Having a rainy-day fund is key, of course. Most experts think it should contain enough cash for six to 12 months of expenses. It needs to be easily accessible in a checking, savings or money market account. For a little more interest earnings, you could stash some is three- or six-month certificates of deposit. But those pay so little interest these days it's hardly worth the trouble.

Also see: How to Fill Income Gap Forcing You to Take Social Security Early

Key to preparing for the worst is to minimize fixed expenses -- those monthly costs you cannot trim, such as a big mortgage or car payment. Stretching to own the most expensive home you can afford also means big fixed expenses for property taxes, homeowners insurance and heating.

To gird for trouble, also think about setting up lines of credit; most lines of borrowing would probably be impossible after you becoming unemployed. A home equity line of credit, or HELOC, would allow you to borrow as little of as much as you need up to a given limit, and you'd pay no interest until you start tapping the account. But you must set it up while you have a job.

Having credit cards can be a lifesaver in an emergency, but if unemployment drags on, card debt can snowball into a crushing load. So it's wise to get a couple of cards approved while you can -- while employed -- but to be very conservative about using them. Don't get too many or you'll damage your credit score.

Homeowners 62 and over can also look into a reverse mortgage, which is a loan against the equity in the home. These are especially attractive because you can qualify even after you lose your job. That's because there are no monthly payments on a reverse mortgage. Instead, the debt is paid from the proceeds of a home sale after the homeowner moves or dies. Fees can be high, so a reverse mortgage is probably best left until there's no good alternative.

Also see: When It Makes Sense to Take a Loan From Your 401(k)

Because life is uncertain, spouses or live-in partners should think carefully before going from two incomes to one. And it can pay to build a sideline, doing some freelancing or operating a part-time home-based business that could be throttled up if the day job disappears.

Social networks offer a safety net as well. With Facebook, Twitter, LinkedIn and other services, you can keep in touch with former colleagues and classmates who might help out if you're suddenly in a job hunt.

No precaution is perfect, but luck does favor the prepared. Workers who can weather a period of unemployment are better able to hold out for a new job they really want, rather feeling compelled to grab the first thing that comes along.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,810.06 +91.06 0.51%
S&P 500 2,063.50 +10.75 0.52%
NASDAQ 4,712.97 +11.1030 0.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs