With cutbacks, mergers and downsizing, job security has become a thing of the past. Nowadays, when it comes to longevity within the workplace, nothing is guaranteed. How do you prepare if faced with an unexpected job loss? What is your Plan B? The Virginia Society of Certified Public Accountants (VSCPA) offers these five tips for preparing and coping with your financial loss.
Create a Financial Plan
Consider your monthly expenses and determine how long you can cover them while unemployed. Sticking to a budget and trimming nonessential expenses are key. For example, reach out to your credit card, auto, mortgage and insurance companies to inquire about lowering your annual percentage rates (APR) and/or reducing your monthly payments until you obtain steady employment. Do your homework and comparison shop for the best offers available.
Apply for Unemployment Benefits
To bridge the income gap, you may choose to apply for unemployment benefits. The length of unemployment benefits varies depending on the state in which you reside. Keep in mind that taking a severance package, temporary work or withdrawing from retirement accounts may prevent you from receiving unemployment benefits. For state specific information on unemployment benefits and employment assistance, visit the U.S. Department of Labor website.
Plan for Insurance Coverage
Health care premiums can be a large expense for most families. Maintaining health care coverage after an unexpected job loss can become difficult to manage. Under law, you may have the option of staying on your employer’s plan for up to 18 months. However, you should compare rates from multiple insurance companies to find the best combination of rate and coverage affordable for your budget. Note, employees that opt to continue insurance coverage under their employers’ group coverage are responsible for paying 100 percent of the premiums. This means that in addition to paying your share of the premium, you will now have to pay your employers’ share as well.
Opt for Creative Cash-Flow Solutions
Turn all of those unused, unwanted items in your home into a profit by coordinating a garage sale, or by selling your gently used items to a local consignment shop. Taking inventory of your home and selecting items to forego can potentially create a decent return on your investment. Try marketing your items in an online auction such as eBay, selling to the highest bidder. Whatever method you choose, any items you’re unable to sell can be donated to charities such as your local Goodwill for a potential tax break. U.S. Internal Revenue Service (IRS) Publication 526 can help guide you through the details of charitable giving.
Job Search Expenses Can Be Tax Deductible
Whether you’re working on your resume or attending networking events, you may be able to deduct some of your job hunting expenses on your federal income tax return. According to the IRS, to qualify for a deduction, your expenses must be spent on a job search in your current occupation. You may also deduct the amounts you spend for preparing and mailing out your resume. Again, these expenses can be tax deductible only when you are searching for a job within your current profession.
If traveling is necessary during your job search, you can deduct travel expenses to and from the locations you travelled. As a rule of thumb, be sure to keep receipts and to document the amount of time you spend looking for work. It may also be helpful to discuss your options with a tax advisor.
Consult a CPA
A Certified Public Accountant (CPA) can help you analyze your current situation and determine the best course of action with regard to your personal financial plan. Many CPAs receive specific education and training to assist clients with short- and long-term personal financial goals, and have earned the Personal Financial Specialist (PFS) designation.