How to Protect Your Finances After Losing a Job

 

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How to Protect Your Finances After Losing a Job

 

Facing an unexpected job loss is one of the most stressful things you can experience. Beyond threatening your financial security, losing your job can also hurt your confidence and self-esteem. But it's not all bad news. There are several steps you can take to get back on your feet and protect your financial health. Below, you'll find some great tips to help you make ends meet until you can find another job.

Launch a Business

If you're tired of relying on others for your paycheck, take control of your earning ability, and become an entrepreneur. Launching your own business is the ultimate path to financial freedom! To come up with a great business idea, review your professional experience and try to think of a way to build your existing skills into a product or service. For example, if you have experience in accounting, you could start a business doing accounting for corporate clients. Take advantage of your strengths instead of starting from scratch! 

As you get your business up and running, remember to tackle important legal responsibilities. Structuring and registering your business is one of the first things you'll need to do before you can operate your business legally. Many small business owners choose to form an LLC to shield themselves from personal liability and gain special tax advantages. Compared to corporations, LLCs enjoy less paperwork and more flexibility regarding management structures. If you plan on going this route, review the process and requirements around forming an LLC in Ohio so you can save yourself the lawyer fees and file yourself.

Try Gig Work

Unless you have a fairly large emergency fund to draw on, you will need to find a way to earn money until you can get your business running or secure another full-time position. Gig work might just offer the solution you need. If you're looking for work you can do from your computer, consider selling your skills online as a freelancer! You can get started right away by creating profiles on popular job boards and submitting proposals to potential clients. You can also make money in your local community by working as a dog walker, pet sitter, house cleaner, or delivery driver. While the pay may be a bit lower than you're used to, it's better than nothing!

Create a Spending Plan

As you get back on your feet, you may need to reign in your spending a bit. Prioritize your essential bills—like rent and utilities—and cut back on anything you don't need. This is not the time for impulse purchases! Review your spending habits from the past few months and create a realistic budget that your household can rely on for the time being. This might mean canceling your subscription services, eliminating takeout, and putting those shopping sprees on hold. Canceling unnecessary spending will help you avoid taking on debt that will hold you back even after you secure a new source of income. 

Manage Your Debt

Your debt can easily get out of control when you're not earning money, so it's important to deal with this right away. Start by making a list of all your debts so you have a clear picture of what you owe. Next, prioritize the debts that come with serious consequences for non-payment, like your mortgage or car loan. It's less damaging to your credit score to miss payments on non-priority debts like credit card bills and unsecured loans. Still, try your best to make your minimum payments. You may also be able to consolidate or refinance some of your debt to reduce your monthly payments. 

Find Ways to Save on Everyday Purchases

With smart shopping, you should be able to save money on nearly all of your everyday purchases. For example, you can reduce your grocery bill by purchasing pantry staples in bulk, shopping in-season produce, and avoiding pre-packaged foods. Subscription services like Amazon Subscribe and Save can help you save even more on regular purchases. Besides receiving monthly discounts for essential household items, this is a great way to avoid extra trips to the store during which you're bound to pick up a few extra things that you don't really need.          

You also have several options for saving money on entertainment. Take advantage of your local library for books and movies, cancel your cable and sign up for a streaming service, attend amateur sporting events instead of major league games, and cook dinner at home instead of eating out with friends. You don't need to spend much—if anything—to have fun!

Prepare for the Unexpected

After finding your financial footing again, use what you have learned from this experience to prepare for the future. You never know what might happen! Make sure you're always prepared to weather another period of job loss so you can avoid taking on debt or depleting your long-term savings. 

This is where an emergency savings plan comes in. As soon as you start earning enough money to pay all of your bills, start contributing a portion of your income toward an emergency savings account. Most experts recommend saving 3 to 6 months' worth of living expenses in your emergency account, but any amount is better than nothing. After building up your emergency savings, you can finally start reintroducing some of those non-essential luxuries that you cut from your budget earlier.

Losing your job may feel like your worst nightmare coming true, but it doesn't have to upend your life. Find quick ways to make money, build a strict household budget, and consider launching a business. In the end, losing your job might have been just the push you needed to pursue your own path!

Want to learn more about taking control over your finances through specialized financial planning? Visit Columbus Financial & Success Coach

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