Find a Job that Matters

Ep. 065: How to Manage Money When You’ve Lost Your Job, with Eric Rosenberg

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How to Manage Money When You’ve Lost Your Job, with Eric Rosenberg

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When you lose a job, not only does your income stop, but it can also be a hit to your ego. You first need to clear your head and start looking to the future, says guest expert, Eric Rosenberg. Don’t let unemployment drag you down and define who you are. Find a way to thrive.

After you have fully processed what happened, your next step is to look at your budget to find your unnecessary expenses. Pull out large recurring expenses that may provide you enjoyment, but aren’t providing any tangible benefits. A cable bill is a good example of this. Every dollar you have saved becomes important if you are unsure of how long you will be without work. Other expenses which should be cut are things you can make at home for a lesser cost, such as coffees and meals.

Your financial accounts should be used in the following order:

  • Checking — Use this fluid money first.
  • Savings — Banks pay little to no interest in these accounts.
  • Stocks — Sell off stocks if they are outside of a retirement account.
  • 401K/IRA — Use this option only as a last resort.

Do you have student loans? Eric says no matter which type of student loan you have, federal or private, you should notify the lending institution that holds your loan. Many times, during hardships these institutions offer deferments, which lower your monthly loan payments, but the company continues to earn interest on the balance.

Ignoring health care coverage is a big no-no. In fact, under the Affordable Care Act, it is a requirement for individuals to have current health care coverage. Your previous employer is bound to offer you COBRA, which will allow you to keep your current level of coverage, but you must pay the employer’s previous contribution amount.

If you do not have enough money saved to last for at least 6-months consider a part-time job to make ends meet or to avoid going into debt.

Pro Tip — If you do spend money during unemployment, invest in something which will help you to get your next job!

Eric RosenbergEric Rosenberg Bio

Eric Rosenberg is a finance writer who publishes the Personal Profitability Blog and the Personal Profitability Podcast. He has helped countless people clean up and fix their finances. Eric is proud to announce he has finally broken through the $10K a month threshold through his side business!  Find him on Twitter @EricProfits.

 

Ben’s Job Search Resource:

Ben’s resource this week is the Occupational Outlook Handbook from the Bureau of Labor and Statistics. The site allows job seekers to search through 575 different professions. It includes a comprehensive job review, job requirements, and a job feasibility outlook through 2024.

Jenna’s Find Your Dream Job Listener Question:

Today’s question comes from Dennis Mace, who asks, “How can I best utilize the Mac’s List website?”

If you would like the team to answer a job-related question, email it to jenna@macslist.org, or call her at 716-JOB-TALK. If we use your question on the air, you will receive either a copy of our new book, Land Your Dream Job Anywhere (to be published February 1, 2017) or a Mac’s List Coffee Mug, your choice. Or, if you’ve found a job resource you think everyone should know about, send it to ben@macslist.org, and tell him how it has helped you find your dream job.

Ben and Jenna’s segments are sponsored by Land Your Dream Job Anywhere (to be published February 1, 2017). The book offers practical, actionable, and proven tools to help you get clear about your career goals, find hidden jobs, ace your next interview and more.

If you like this show, please help us by rating and reviewing our podcast on iTunes. We appreciate your support!

Opening and closing music for Find Your Dream Job provided by Freddy Trujillo, www.freddytrujillo.com.

Full Transcript

Mac Prichard:        

This is Find Your Dream Job, the podcast that helps you get hired, have the career you want, and make a difference in life. I’m Mac Prichard, your host and publisher of Mac’s List. I’m joined by my co-hosts, Ben Forstag, our Managing Director, and Jenna Forstrom, our Community Manager. This week, we’re talking about how to manage money when you’re out of work. Our show is brought to you by Land Your Dream Job Anywhere, the new book from Mac’s List available February 1st. Land Your Dream Job Anywhere shows you how to find meaningful, well-paying work wherever you live. For more information, visit macslist.org/anywhere.   

A job loss can happen without warning. Even in prosperous times, companies go bankrupt, nonprofits lose grants, and layoffs follow. If this happens to you, it may take you several months to find another job. How will you make ends meet after you cash your last paycheck? This week, our guest expert is Eric Rosenberg. He’s a personal finance writer. Eric says you need to budget carefully during times of unemployment. He also thinks you need to invest in your career, even when you’re out of work. Eric and I talk later in the show.

Each of us will likely change careers several times during the 40+ years we’re in the workplace. Ben Forstag has found a government publication you’ll want to check out if you’re ready to change occupations. He tells us more in a moment. How can you make the most of the resources offered by Mac’s List, the publisher of this podcast? That’s the listener question of the week, and we promise it’s not a plant. It comes from Dennis Mace, and Jenna Forstrom offers her advice.

First, as always, let’s check in with the Mac’s List team. Now, Jenna, Ben, I know you two have both suffered job losses at different times in your career, as have I several times. How have you managed your finances when that’s happened to you?

Ben Forstag:  

Fortunately I have a financial planner – my wife – so she takes care of almost all of our money. She does a really good job of squirreling money away when we’re both working. That way we have like a ‘rainy day fund.’ My wife is a consultant, so for work for her is always … She can have spells of several months where there’s no work coming in, so I think she always plans ahead of thinking like, what happens when she’s not having work and that’s been built into how she manages our money as a couple. The funny thing though, and I might have shared this on a previous episode, I’ve had two periods in the last five to six years where I was unemployed. During both of those periods, within two weeks of either quitting my job or being laid off, I found out my wife was pregnant. We are not the most practical people when it comes to planning these life decisions, but that’s the way it’s worked out and fortunately everything’s worked out for the good.

Mac Prichard:        

That’s great. How about you, Jenna?

Jenna Forstrom:    

I think I was unemployed twice while I was in my 20s, and I think I did what every 20-year-old would do is have a complete panic attack about finances. I’m also a young homeowner, but I have worked really hard to set myself up for success. I have roommates so that’s like a shared burden when it comes to my mortgage. I have always been volunteering, so I feel like in moments like that, you’re reminded … Especially for me, I was unemployed. I got laid off and then next day I went and served the homeless, and it was just a … So I spent the entire eight hours before I went to volunteer freaking out about I’m going to end up homeless, and then you’re serving the homeless and you’re like, “Okay, I still have a roof over my head. I have parents that, if I need to ask for help, they’ll help me.”

Then funny things happen. It was like during the quarterly statement so my Roth IRA statements were coming through, my 401(k) statements from previous employers, and it’s like you have this safety net. Everything will be fine. You went to college. Breathe through this process and just get a hold and tighten. It’s definitely like a tighten-up-your-bootstraps kind of thing. You don’t go out to eat. You don’t go out for happy hour. You eat peanut butter and jelly sandwiches and tuna fish pretty regularly. But I also think, when you’re unemployed, it’s when your friends bless you in ways that you weren’t anticipating.

I got laid off the second time, no, sorry, the first time, and Terry Starbucker, who is a shared connection, he was like, “Oh, well, I’m speaking at this conference. Come help. Come volunteer.” He gave me basically like a free conference pass. That was so encouraging that someone professionally was pouring into me in a moment where I felt like I was really stupid, really dumb, and I had lost this opportunity. It was like, “No, the community has your back,” and it’s just really nice. If you are unemployed, seek out people that can bless you, and if you are employed and you have unemployed friends, pour into them, because they need it.

Mac Prichard:        

Thank you both for sharing those stories. I certainly identify with both of you. I was fortunate with my wife, Kris. She’s a very good manager of money as well, Ben, so we’ve always had some cash in reserve and those backups and those assets, not only financial, Jenna, that you talked about, but friends and family as well. It is scary to be unemployed, but knowing that there are people out there who have your back helps a lot. In my experience, I had two long periods of unemployment, once in my 20s, once in my 30s. Like you, Jenna, we paid careful attention to daily expenses and tightened the belt where we could. We did without things that we’d become accustomed to, like cable television.

Then when my unemployment benefits ran out, and they ran out both times, I took part-time jobs, once working as an office temp. Then, actually, the other was a full-time position but it was very low paying on a campaign. But it was important to have income. You got to pay your bills, and also it’s good for your soul, too, to get those salaries. We’re going to talk more about this with Eric, and I know he’s going to have very practical advice about what you can do until you find your next job.

In the meantime, let’s turn to Ben who’s out there every week searching the nooks and crannies of the internet. He’s out there on your behalf looking for websites, books, and tools you can use in your job search and your career. Ben, what have you uncovered on the internet for us this week?

Ben Forstag:  

This week, I want to talk about the Occupational Outlook Handbook. This is a website that comes from the Bureau of Labor Statistics. It’s available at www.bls.gov/ooh. Ooh.

Mac Prichard:        

Ooh.

Ben Forstag:  

Ooh.

Jenna Forstrom:    

Ooh.

Ben Forstag:  

This is a website, and it’s got 575 different professions listed there. You can search through all these different options by keyword and median pay, education requirements, and availability. If you click on one of the professional titles, you get this real comprehensive 360 review of the profession, including a description of the job with the 2015 median pay, so this is like really relevant, recent data on what people are making in that profession, the typical entry level education, whether you need work experience to get into the field, whether there’s on-the-job training available which is huge, especially if you’re looking to transition into a new field, the number of people who are currently employed in that job.

Then this is the piece I thought was really interesting, the job outlook growth through 2024. You can find out first, kind of what the environmental factors around each profession are, but also, what’s the future of this profession look like, in terms of are there going to be more opportunities in the future or are there going to be less? I think this is a really great resource for anyone who is looking to transition into a new sector or particularly people who want to do something different but aren’t quite sure what, because you can go through and get a real high-level snapshot of what fields have the most opportunities and how your current skills and education and experience line up to get you into those fields.

Mac Prichard:        

Any surprises when you looked at the list, Ben, in terms of either growth of occupations or perhaps salary?

Ben Forstag:  

I think a lot of the data there backs up things that we’ve talked about in the past, so technological fields, data analysts, there’s an insatiable demand for people who can program and look at data on high levels, and any kind of technology job comes with a much higher salary and a lot of job prospects. You might remember a couple weeks ago, I talked about a resource that was the worst professions moving forward. This was a journalist’s attempt to point these things out. Do you remember what the worst profession was?

Mac Prichard:        

It was being a reporter – in the newspaper.

Ben Forstag:  

Yeah, it was just print journalists. Yeah. Just out of curiosity, I went through and found print journalist there. Yeah, the outlook according to the Bureau of Labor Statistics is not good for print reporters. I don’t want to crush anyone’s dream. I’m certain that a lot of people are making a good livelihood as a print journalist, but it’s not the easiest path to take for a career.

Mac Prichard:        

But I would imagine, too, there were other jobs that require writing that did look like there would be demand for in the future. Is that correct?

Ben Forstag:  

Yeah, definitely. Certainly things like science writing or technical writing, again there’s a strong demand for that. They also had a generic category just for writers in general. I think this meant something greater than just folks writing books, but people with strong writing skills are in demand, although I think what the data shows is that a lot of that demand is driven by freelance work rather than nine-to-five permanent employment.

Mac Prichard:        

Okay. Good. Well, thank you for sharing that with us, Ben. If you have a suggestion for Ben, please write him and we may share your idea on the show. His address is easy to remember. It’s ben@macslist.org. Now it’s time to hear from you, our listeners. Jenna Forstrom joins us every week to answer one of your questions. Jenna, what’s in the Mac’s List mailbag this week?

Jenna Forstrom:    

This week’s question comes from Dennis Mace who asks how he can best utilize the Mac’s List website.

Dennis Mace:

Hi. My name is Dennis Mace. A couple of questions I have. I’m new to Portland, Oregon, just moved here from Connecticut. I’ve been told that the Mac’s List is a great place to start. I guess my question is: is it helpful for me to, one, post a resume? Two, how can I best utilize everything that Mac’s List offers for me besides the job listings? Is there an event tab or is there meet and greets? How can I basically maximize my potential of meeting potential employers? Those are a couple questions I have that would help somebody, I think, new in a city. Thanks. Bye.

Ben Forstag:  

Did you plant this question, Jenna?

Jenna Forstrom:    

Of course I did. I don’t have a Dennis in Connecticut. I have a Dennis in New Hampshire but not Connecticut. I’ve got maybe like a Denny, but no. What do you guys think? What’s the best way to use Mac’s List?

Ben Forstag:  

I would say, before we talk about Mac’s List, let’s take a step back. I think no matter what resource you’re using for job search advice, and I think there are a lot of good ones out there – Mac’s List is one of many – I think it’s not enough just to sit there and read the blogs or listen to the podcasts, per se. I think at the end of the day, if you’re getting good advice, a lot of that advice is going to be: you need to be hitting the pavement and meeting people.

Certainly one of Dennis’s questions was about, should he be going out to events and things like that? The answer for that is an emphatic yes. You need to go out there and meet people. You got to talk to people, let people know about your passions, your interests, your skills, what kind of work you’re looking for, because I think ultimately that is the fastest and easiest way to find interesting work opportunities. If you’re spending all of your day just kind of sitting there reading blogs, a lot of great content out there, but you could spend hours and hours and hours reading content and probably not getting a whole lot farther in your job search at that point.

Mac Prichard:        

Yeah, I agree, Ben. It is about getting out and seeing people. Don’t limit yourself to just one site. Once you’re clear about your goals or you have a short list of goals that you want to explore, look for niche job boards in those fields, but also ask yourself what your biggest challenges are in your search. What do you need most help with, whether it’s updating your resume or improving your interview skills, learning how to work a networking meeting or run an informational interview? Whatever your challenges might be, there are books and blogs and podcasts about all of those topics, but you want to have a strategy for choosing the information that you use so that you can act on it as quickly as possible.

Ben Forstag:  

Yeah, I think you kind of hit the nail on the head there, Mac. It’s about strategy rather than tactics all the time. I think a lot of job search resources, including ours, have a lot of information about tactics – tactics for your resume, tactics for interviews. I think you can get caught up in trying to fine-tune things like your resume too much where, the resume isn’t your problem, right? Or the interview is not your barrier. Your barrier is you need to make better contacts here or whatever. Approach the entire job search strategically and not get caught up in all those little tactics within that strategy.

Jenna Forstrom:    

Right. You guys have great feedback. I’m going to actually answer the question and tell him how to use Mac’s List appropriately.

Mac Prichard:        

Uh oh. Have we gone off topic?

Jenna Forstrom:    

No. I mean, it’s everything we say: 80% of jobs aren’t posted on job boards so you need to get out and network. But he’s asking about how to use Mac’s List, so I’m going to provide some little thought-nuggets to Mac’s List.

Jenna Forstrom:    

Bring it in. Our first thing that we’re known for is an email every Tuesday at two, so if you’re really worried, don’t worry about it on Monday. Check it on Tuesday. We email it to you, and fun fact: our newsletter is usually so big that it gets clipped. So open it up in a new window because that’ll probably double the amount of jobs you’re actually seeing posted. That’s my little fun Community Manager tip. We obviously have this amazing podcast, and I was thinking back. Mac interviewed Terry Starbucker about how to find a new tribe in a new community which ties back into the networking thing when you’re new to a city. I would definitely suggest Dennis check out that … if not all of our podcast episodes, definitely that one.

And then, we have a free online course. It’s our first paid product, and we’re really proud of it. If you’re new to Portland, or living anywhere, it’s got everything you need – so if you need, like, a fast-track, ‘I don’t want to read 300 blog posts’ (which we do have on Mac’s List), you can pay for this online product and Mac literally sits you through everything from organizing your resume, to interviewing, to networking, to informational interviews – it’s, like, everything you could possibly think about, Mac’s got an answer for you. And there’s a Facebook group and we do Facebook Live events, so it’s a great resource.

Yeah, as we all talk about on this podcast all the time, really you just got to go out and make friends and make professional contacts.

Mac Prichard:        

Thanks for keeping us focused and on task, Jenna, since I know we can go off on tangents sometimes. But I also think it might have been a little bit of my Midwestern-modesty at play too, because we’re very proud of what Mac’s List offers and we encourage people to use it. There are other great resources out there too, but I think your advice is spot-on, so thank you.

Terrific. If you have a question for us, please email Jenna. Her email address is easy to remember. It’s jenna@macslist.org. Or call our listener line. That number is area code 716, 562-8255. That’s 716-JOB-TALK. If we use your question on the show, we’ll send you a free copy of Land Your Dream Job Anywhere or a Mac’s List coffee mug. It’s your choice. These segments by Ben and Jenna are brought to you by Land Your Dream Job Anywhere, the new book from Mac’s List, coming February 1st.

Now, for 15 years at Mac’s List, we’ve helped job seekers in Portland, Oregon find meaningful, well-paying, and rewarding jobs that they love. Now we’ve taken all of our best job-hunting advice, we put it in one new book, and it can help you no matter where you live. Just like this podcast, our new book offers practical, actionable, and proven tools you can use right away. In Land Your Dream Job Anywhere, you’ll learn how to get clear about your career goals, find hidden jobs that never get posted, how to ace your next job interview, negotiate the salary and benefits you’ve earned, and take charge of your career for the long run.

Land Your Dream Job Anywhere contains special features from many of the most popular guests who have appeared on this podcast. Get extra insights from more than a dozen national career experts, people like Farai Chideya, Kerry Hannon, and more. Land Your Dream Job Anywhere arrives on February 1st, but don’t wait. Join our pre-launch mailing list, and we’ll send you the first chapter, and other valuable resources, for free. Visit macslist.org/anywhere. Now let’s turn to this week’s guest expert, Eric Rosenberg.

Eric Rosenberg is a finance writer who publishes the Personal Profitability blog. He has helped countless people clean up, and fix their finances. He joins us today from Ventura, California. Eric, thanks for being on the show.

Eric Rosenberg:     

Hey. Thanks for having me. I’m glad to be here.

Mac Prichard:

Yeah, it’s a pleasure to have you here. Our topic today, as you know, is how you should manage your money after you’ve lost a job. I know, Eric, you’re a big fan of budgets. How do you think someone should budget after losing a job?

Eric Rosenberg:     

Losing a job, just starting out the gate, it’s a tough situation. Your income’s stopping. It can be very personally shaking. It makes you lose faith in yourself a little bit. First thing to do is clear your head, and start looking forward, rather than backward, because you can’t change anything that’s happened. When you get down to look at your budget, it’s important to try to cut those big recurring expenses, and look for really big wins. If you’ve lost your job, you want to look for little wins too, because you want to stretch every dollar you have in savings as far as possible.

My general budgeting advice: if you want to do the coffee shop thing, that’s okay, as long as you’re able to cut spending elsewhere to be able to pay for it. But when you’ve lost your job and your income’s not coming in anymore, you’re in a new situation where maybe rather than go to the coffee shop, you might want to make coffee at home. You know, things like that. Anywhere you can cut and save a few bucks here and there will help you stretch the savings you have until you’re able to get that next job.

Mac Prichard:        

Now do you have a rule of thumb, Eric, that people should plan for while they look for their next position? Should they assume they’re going to be without income for three, six, or maybe even nine months or longer?

Eric Rosenberg:     

Well, it really depends on your industry, what your background is, your education, because when actually … I actually did lose a job once. When I was living in Portland, I got that dreaded meeting where they told me it was my last day. I was really lucky with my finance background. I have both an undergraduate and an MBA in finance, so I’m very finance-educated. I was able to hop back into a job, it was about six weeks, but that’s not always going to be the case.

Some people have job searches that do last for three months, six months, even a year. I spoke to someone, an old coworker, whose husband was in a very niche engineering field that there isn’t a whole lot of need for nationwide. He wanted to stay in the Oregon area. When he was looking for a job, it actually took him a couple of years. You really never know when your next job is going to come.

There are a couple of things you can do in the meantime. You can go find a service-industry job or a retail job to help pick up a little bit of income in the meantime. But overall I’d say to try to plan to stretch your budget for at least six months because you never really know what’s going to happen next.

Mac Prichard:

Now you mentioned cutting out coffees if you’re going to a coffee shop every day. What are some other expenses that people should pay attention to, assuming that they might be out of work for six months or longer?

Eric Rosenberg:     

Sure. The first things I would look at are things that you might enjoy but don’t provide you any real tangible benefit. Like internet access, you can’t live without internet. You can’t live without your phone. Those are things that most everyone in America at this point needs, especially if you’re in a job search because so much of it happens online now. But things like cable TV, cable’s easy to pick on in the budgeting world, but I actually cut my cable not when I was out of work, but when I had a job.

In the years since, I’ve saved over $4,000. But that was $70 every month I was paying to, essentially, just sit on my butt on the couch and watch things and zone out. Zoning out and watching things isn’t going to help you find a new job. It’s just going to distract from that. Not only does cutting cable help put $70, $80, even $120 a month or more, depending on your cable package, back in your pocket, but it also gets you up off the couch so you’re looking for that job rather than hanging out at home.

Mac Prichard:        

Now you mentioned things that you probably don’t want to cut, like internet service, that help you with your job search. What other things shouldn’t you cut from your budget?

Eric Rosenberg:     

The main things that you need to live, like your utility bills, you can’t live without that. Your rent or mortgage, you have to have a place to live. Food, those are all things you need, health care-related expenses. Those types of things you want to keep in your budget and you want to plan – look back at your average spending on those categories for the last three months, six months, 12 months, and build out a plan to cover those costs for at least the next six months.

Mac Prichard:        

Now let’s talk about savings, Eric. How should people manage their savings accounts during a time of unemployment?

Eric Rosenberg:     

Right. Hopefully when you were in employment you were contributing to your savings and retirement accounts and so on every month, and you have an emergency fund, things like that. Assuming you do have those savings, this is the time that you should use them, but be very careful which savings you use. Obviously you want to go to your checking account first, because that’s your living money, kind of your … Not a slush fund, but your moving account where money comes in and out every month. But if you’ve depleted that, the next place to look is your savings account.

That should be like a bank savings account, which typically right now banks are only paying maybe 1% interest on the high side, so you’re not really giving up a whole lot by taking out of savings other than taking a little bit of security from your future, but you need that security now. If you’ve budgeted well and you’re not wasting money and you’re not going out to restaurants and bars all the time, you’re eating most of your meals at home and cooking, and have done the whole budget thing, then it’s okay to look at your savings accounts as the next place to go.

But I would be very hesitant and careful to say that you should look at those retirement accounts. That’s a place that some people might think, “Oh, that’s easy money I have put away,” but the taxes and costs related to withdrawing early from an IRA or a 401(k) or a 403(b) if you’re in certain health care or education industries, those taxes and fees can eat up so much of your money that you’ll never get back. If you’re able to hold off from touching those tax-advantaged retirement accounts and focus on your own savings, or even if you have to sell off a couple stocks if you have an investment account, that’s okay as long as, again, they’re not in a tax-advantaged account. Those would be the first places I’d go.

Mac Prichard:        

Let’s talk about those consequences if you do cash out your IRA or a 401(k). You mentioned that there were penalties and other costs. Can you be more specific about those consequences?

Eric Rosenberg:     

Sure. The first thing that will happen is when you withdraw from those accounts is it’s treated like income. The way a 401(k) works in general or a traditional IRA, when you put funds in, you don’t pay any income taxes on those, but when you withdraw, you do pay the income taxes. If you take money out of your 401(k) or a traditional IRA, you have to pay your regular income tax rate on all the funds you take out. The average income tax rate is about 25%, so for every $100 you take out, $25 of that’s going to the government right off the top. Then in addition there’s penalties which I don’t remember the exact numbers off the top of my head, but if I remember right, they’re about 10% or more. In addition to that regular income tax rate you’d pay, you’ll pay that extra penalty on top.

All of a sudden now for … Let’s say it’s about 10%. You take $100 out. You’ve just paid 25% plus 10%, the taxes plus the penalty to the government, so your $100 isn’t really $100 you’re taking out. That’s really robbing your future of that income which someday hopefully you’ll be able to retire. This job loss, yeah, it’s going to be a delay, but we don’t want that job loss to turn into something that eats years out of your retirement. While you’re not going to be able to contribute to your retirement accounts, obviously, without income, it’s really best if you can avoid touching them.

Mac Prichard:        

Yeah, and if you do take that money out, as I understand it, Eric, you don’t have to pay the government until you file your income tax returns, so, you may take the money out in the summer and then when you file your return the following year, then you’ll have to pay that bill as well

Eric Rosenberg:     

Exactly. So, let’s say you withdraw the money in the middle of the summer – it’s June, you take the money out, and you’ve spent it all, and then end of the year comes, it’s time to file your taxes… April comes around, you’ll get a form from the financial institution that holds those accounts for you, showing that you’ve done those withdraws, and that’s reported to the government, so that has to go on your taxes and you have to pay that back. So even if you’ve already spent the money, now you’re going be going into debt to try to pay your taxes for money you took out from your retirement account. So that’s a situation you definitely don’t want to be in. The only kind of flip side to that is there are some laws that allow you to borrow from your retirement accounts. I would do that before I would withdraw from them, but it’s the same kind of concept, you have to pay it back eventually. And if you are unemployed and you really need to get food on the table, that’s the time to take a 401k loan, if it’s going to be the difference between being hungry and not being hungry, gas in the tank or no gas in the tank. But do keep in mind, if you take a loan, you have to pay that back, otherwise all those taxes and penalties kick in.

Mac Prichard:        

You mentioned loans, Eric. Let’s talk about student loans. Many of our listeners may be recent graduates or people in mid-career who returned to grad school and financed their education with loans. What can people do about student loans during a time of unemployment?

Eric Rosenberg:     

It depends on the kind of student loans you have. If you have federal student loans, you’ll be in better shape than if you have private student loans. If you have federal student loans, you can reach out to your loan servicer, which is usually a bank or a big finance company, and that’s whoever you send your check to or whoever you make your online payment to each month. Contact that company. Let them know what’s happened. Let them know you have a temporary loss of income   

Sometimes you can do what’s called a deferment or forbearance, and that gives you a period of time that you don’t have to make any payments. But keep in mind, interest will keep accruing, so your loan balance will rise during that period, but you don’t have to make any payments until you get your job again. It’s a good way to push those payments off a bit into the future. Just remember again, always keep in mind, there’s a consequence to any decision you make now. The consequence to deferment is you’ll have to pay it later and higher interest, but if you don’t have income coming in, that’s probably the best option.

Now, for private loans, those are not always an option, but it’s still the right thing to do to reach out and call that lender, whatever bank or financial institution you borrowed from. Let them know, “Hey, I lost my job. I’m working on finding a new one. Is there any way we can do some kind of deferment until I get a new job?” Sometimes they say yes. Sometimes they say no. It’s up to the lender.

Mac Prichard:        

Okay, but you do have options and it is negotiable. What about health care, Eric? What are people’s options when they get that pink slip or that layoff for health care, and what factors should they consider when they’re evaluating those options?

Eric Rosenberg:     

Sure. Health care is something that we can’t live without and actually is now the law that you can’t live without or you pay extra tax penalties. This is definitely not an area to ignore. When you lose your job or if you leave a job voluntarily, your employer is required by law to provide you with something called COBRA. That’s an acronym, but it essentially means you can keep your health coverage that you had from your employer, but you have to start paying the portion of your health insurance costs that your employer was paying for you. You’ll notice at the bottom of your pay stub, there’s a little deduction line listing out all the different items that they withdraw from your paycheck for, and one of those is health insurance.

Usually on your pay slip or some kind of benefits statement on the other side, you’ll see that your employer is paying about, often three times as much as you’re paying every month. Let’s say you’re paying $150 a month. Your employer might be paying another $400 or $500 on top of that. What COBRA does is it lets you keep your insurance but you have to pay that portion the employer was paying for you. But having just lost your income, seeing an additional $400 or $500, $600, $700 a month expense, depending on your employer, the size of your family, and what kind of insurance you have, that might not be the best option.

So, there’s another option, thanks to the Affordable Care Act, or Obamacare. You can log on, or go on to healthcare.gov or your state’s marketplace, and sign up for new insurance because of a job change. There’s – normally you can only sign up for insurance during a period called Open Enrollment, which is the last couple months of the year, usually it starts in October or November, and goes until the first of the year, and that’s signing up for your new health insurance that starts in January. But you can get special enrollment period if you’ve moved states or just had a baby or a divorce or adoption, death in the family, there’s certain situations that you’re allowed to sign up for heath care anytime in the year, and most likely you can find a policy or plan, health plan, that is much lower-cost than the one you were getting through your employer, through the marketplace, and because you’re now unemployed, don’t have any income coming in, you can usually get a subsidy on that health insurance cost. I would go to healthcare.gov. You can read all about the subsidies and the tax-implications of health insurance, but that’s definitely the place I would look first. Especially, I would look at the COBRA forms first, just to understand the costs, and then I would compare that with what I found on healthcare.gov and make the best decision based on my needs.

Mac Prichard:        

Okay. You mentioned earlier, Eric, that people might consider taking a part-time job, like working in a service position. What factors should people consider when making that choice?

Eric Rosenberg:     

The number one thing is, do you have enough money in savings to cover the bills? If you don’t, how are you going to cover those bills? If your options are credit cards, some kind of debt, or withdrawing from a retirement account, like we already talked about, retirement accounts, definitely don’t want to touch that. Going into debt, you might make your financial situation even worse, so if you don’t have the savings to get by, you can just work part-time. If you walk around, I know people talk a lot about how hard it is to find a job, but there are some jobs that aren’t that hard to find.

Yeah, they don’t pay as well. They’re not as desirable, but I was actually even … After I left a job working in a bank, I was a waiter for three months. I learned a ton. I can’t say I loved the job, but there were parts of it I really enjoyed. I’m glad I had the experience, and that helped me put a couple hundred bucks… every time I worked a double shift, I was putting money in my pocket – or a single shift – that helped me save for the future.

At that point, I was living with my parents. It was the year after I got out of college, so my situation was a little different, but if you have to pay the rent, the mortgage, food, those basic core necessities, your utilities, if you can’t cover those, that’s the time to start looking for at least a part-time job to help you get by until you find something more permanent.

Mac Prichard:        

Yeah, like you, I took a temporary job during a long period of unemployment working as an office temp. It was not the most glamorous job in the world, but it helped me pay my bills. Also, it got me out of the house. There is something, I think, affirming about working every day that helps you, I think, get more focused about your job search as well. Certainly, that was my experience.

Eric Rosenberg:     

Oh, definitely. There are so many psychological factors that are happening if you lose a job. It’s really easy to blame yourself and put it all on your shoulders. In some cases, you got fired because it was your fault, but if you get laid off or whatever the situation is, don’t let unemployment drag you down and define who you are. Find something that gives you some drive and some lust for life, and having that drive will really help you in your career search, because people, when you’re going through an interview process, they can tell. Is this person happy or are they depressed? Are they the kind of person I want to be around? If you’re all mopey and sad, probably not the kind of person they want to be with, but if you have a positive, upbeat attitude, they can see that as well and that can help your career prospects.

Mac Prichard:        

Now what should people be spending money on? We talked about budgets and the need to save and manage the money you do have carefully, and perhaps going out and getting a part-time job. What should people be investing in during a period of unemployment, Eric?

Eric Rosenberg:     

I would invest in whatever will help you take the right steps to getting that next job, as long as it’s within reason. Going and signing up for a $20,000 code school might not be the right decision, they’re quite expensive, but the basic things like maybe you need a new suit if you’re in a office-type position or office-type role where people wear a suit and tie every day. You want to look professional. You want to present yourself right. You want to have nice, comfortable, good-looking shoes. You want to have a professional presentation.       

Things like your resume, some people can just write a resume and it looks great and they don’t need any help. Some people need a little extra help, and there are services out there that might be worthwhile if you don’t know how to write a resume to get help. Then that’ll help you find the next job. Things that will help bring income in are worth investing in, but don’t just go throwing away money at different job services. There’s a lot of the fraud and scams out there, so be very careful. If you work with a recruiter, you shouldn’t have to pay the recruiter. The business that hires you ultimately should be paying the recruiter. So, be alert and aware of people who might try to take advantage of your situation. But, again, things like resumes, or something that might help you be a little bit more qualified and get you on the right step towards that next job, could be worth the money.

Mac Prichard:        

Okay. Thank you Eric. Now tell us what’s coming up next for you.

Eric Rosenberg:     

Sure. Actually I’m excited to share that I just recently broke $10,000 a month in income for the first time. I publish income reports on my blog so you can find out all about how I did that, what I’m doing, and how you can start earning side income, because as we all know, sometimes you do lose a job. If you have diverse income sources, if you’re earning from somewhere outside of your primary job, it makes the sting a little bit less painful. It’s like, when I lost my job, that time I mentioned earlier, I knew I had my blogging, which was at that point just a little side business to fall back on. That’s now grown to be a full-time gig, so you can actually check on my own podcast, Personal Profitability Podcast, where I talk about personal finance and business and entrepreneurship tips. You can find me on Twitter also at @ericprofits.

Mac Prichard:        

Great. We’ll include links to both your podcast and your Twitter account in the show notes. I know people can also learn more by visiting your website which is personalprofitability.com. Eric, thanks for being on the show today.

Eric Rosenberg:     

Thanks so much for having me. It was great to talk to you.

Mac Prichard:        

Yeah, it’s been a pleasure. Take care.

We’re back in the Mac’s List studio with Jenna and Ben. Tell me, you two, what were some key points you heard Eric make in our conversation?

Jenna Forstrom:    

The two things I took away from this was, one, don’t beat up on yourself too much if you’re unemployed. It happens to a lot of people, so it’s us three here in Mac’s List, plus Eric, so you’re in good company. Take the time to mourn and then move forward. Then secondly, if you’re not currently unemployed and you’re listening to this podcast because you want to make a career change, you can set yourself up for success financially by starting now, because I think people panic when they’re unemployed with finances because they haven’t done the legwork while they were employed.

Just trying to figure out what your budget is, where you can squirrel away $100 a month into a savings that’s like an emergency fund and just building that, will alleviate so much pain if you’re transitioning jobs and you have a month of unemployment, or if you get laid off, or hopefully this doesn’t happen to anyone, but you screw up and get fired. But there are so many things you can be doing while you’re employed to set yourself up with an emergency fund. That was my big takeaway. How about you, Ben?

Ben Forstag:  

I like his point about making strategic investments when you’re unemployed. I know in the past, in my own experience, my knee-jerk reaction when I lose a job is to cut all expenses. I’m not going out at all. I’m not going to do anything. I’m going to live off of ramen noodles for the next three months. But I think when you do that, you really cut yourself off from opportunities that might help you get back to work sooner. Sometimes that means things like resume coaches or just flat-out getting out and talking with friends and other people.

As we say a lot, being out there, going to events, helps you find opportunities that you’re not going to find on a job board, for example. If you’re of the mindset that you’re just not going to spend any money on this stuff, I think you’re actually missing the boat there and you’re hurting yourself in the long run. You have to make these strategic investments. The other thing that the conversation reminded me of is, when I was unemployed last time, I had student loans. I still do have student loans. I’m probably going to have student loans until the day I die. Then I’ll pass them on my children.

Mac Prichard:        

I shouldn’t be laughing.

Ben Forstag:  

But one of the things I found, it just so happened that shortly after I lost my job was the time when I had to re-certify my income-based repayment plan. They gave me a couple options when I called up and said I don’t have a job anymore. One of them was I could defer payments, and the other one is I could just verify my income. It actually worked out fantastic for me because my income at that time was $0. For the next year, I was paying like $5 a month in my student loans and not going into arrears, not being deferred, or anything. Obviously, I wasn’t knocking down the principal or even the interest that much, but I was in good standing with the federal government paying back my loans. I think you can find a lot of creative ways to cut expenses, especially if you have some of those recurring monthly expenses like loans.

Mac Prichard:        

Yeah, when I was unemployed the second time, I had student loans from graduate school. I do remember, I don’t remember the exact arrangement, but being able to postpone payment of those. I think I, as Eric said, was accumulating interest costs, but it was still … It took pressure off the budget. I liked Eric’s point about investing in yourself. For listeners who are thinking, “Gosh, I can’t afford that, to buy tickets to an event or talk to a career coach,” I know we’ve talked in previous shows about how, if you want to go to an event, you can volunteer to staff the registration table or perhaps take photographs. You can do something, and I know, Jenna, you’ve spoken about how you attended events when you were unemployed by volunteering and getting tickets. Then if you haven’t done so, you can always check in with your career services office if you’re a graduate of a college. Whether you go there in person or talk to somebody over Skype or phone, you can get excellent advice and good suggestions from the place where you went to school.

Jenna Forstrom:    

I think the other thing that’s great about when you’re unemployed is time is something you have a lot of. Just working back, and if you have medical loans or student loans, and taking the time and sitting through the 1-800 number and negotiating and just saying like, “This is where I’m at. How can we lower that?” I don’t have student loans, but I got laid off and I had some medical bills. I just called and they were like, “Oh, yeah, if you just pay like 30 bucks a month until this goes away, like you’ll be fine,” and it’s like every month. It was just like such a relief not to get a big bill every month. It was like, “You only owe them 30 bucks.” That was like a 45 minute phone call which was really annoying and really painful, but when you’re unemployed, you have 45 minutes to kill, where if you’re in your day job, you’re just writing checks and not thinking about anything like that.

Mac Prichard:        

Yeah, everything can be negotiable. You just have to make the effort. Thank you both and thank you all for listening to today’s episode of Find Your Dream Job. If you like what you hear, please sign up for our free weekly newsletter. In every issue, we give you the key points of that week’s show. We also include links to all the resources mentioned and you get a transcript of the full episode. If you subscribe to the newsletter now, we’ll send you our job seeker checklist. In one easy to use file, we show you all the steps you need to take to find a great job. Get your free newsletter and checklist today. Go to macslist.org/podcast.

Join us next Wednesday when our special guest will be Pete Mockaitis. He’ll explain the reasons why employers might be ignoring your resume and what you can do about it. Until next time, thanks for letting us help you find your dream job.

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Mac Prichard
Mac Prichard publishes Mac's List and owns and operates Prichard Communications, a public relations agency that serves non-profits, public agencies, and foundations across the United States. He also blogs regularly about job-hunting.
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