Life Event: JOB LOSS Losing your job can be traumatic, but much of the trauma may be due to shaky finances. Whether you're about to leave a job - or your job is about to leave you - you can take a number of steps to help smooth the transition to a new position. These steps fall into two categor- ies: financial and professional. Here's a checklist of items to consider before and during a job search. BOLSTER YOUR FINANCES Sources of income and savings - before your job ends: o Decrease 401(k) plan contributions to the minimum necessary to receive the company match. Put the after-tax difference in an emergency cash fund. o Establish a home-equity line of credit to borrow against. o Eliminate all unnecessary payroll deductions, e.g., purchasing savings bonds. o Take a loan against a 401(k) plan as a last resort; such loans are often due when your job is terminated. Unpaid amounts typically are considered distributions and are subject to regular income taxes and if you are younger than age 59H tax penalties. o Replace group term life insurance with personal term or universal life insurance. Spending priorities for fixed expenses - If your job search is dragging on and money is getting tight: o Pay monthly rent/mortgage and home-equity loan bills first. o Pay utility bills second. o Make minimum payments on credit cards, department store cards and then gas cards, in that order. o Restructure debt. Borrow against a home-equity line of credit to pay off a high-rate auto loan, but only if you can make the payments. This will save on interest and taxes. Also, you may be able to modify your mortgage to lower your monthly payments. o Contact your lender for details; usually there are either low closing costs involved, or perhaps none at all. o Discretionary spending - Eliminate all unnecessary expenses. For example: Cancel life insurance on your children, drop "extra" phone and cable services, cancel magazine subscriptions. Carpool, recycle, use coupons and avoid eating out. REEVALUATE INSURANCE COVERAGES o Unemployment insurance - Contact your state's unemployment office immediately upon termination to begin the process of applying for and collecting unemployment benefits. Check to see if your state allows you to collect both unemployment and Social Security benefits. o Medical insurance - You may be able to cover yourself and your family through your spouse's employer's plan. If this is not possible, you may be able to continue your current medical coverage under the COBRA law. This is less expensive than trying to replace your group coverage with private coverage. Look into switching to a health maintenance organization (HMO); they usually have low per-visit charges. o Life insurance (term) - If you lose coverage under your employer's plan, personal term or universal life is the most economical way to maintain coverage. If you're in good health, you may want to "reenter" your policy for a lower rate or purchase new insurance at that lower rate . Be sure to get a clean bill of health from your doctor before submitting to the insurer's medical test, and make sure the new policy is effective before canceling the old one. o Auto and homeowner's insurance - Increase deductibles on auto and homeowner's insurance to lower your premiums. ADDITIONAL FINANCIAL CONSIDERATIONS o Lump-sum distributions - If you will receive a lump-sum pension or savings plan distribution, transfer that money directly into a separate IRA. Invest in a money-market fund if you feel you may need to make a withdrawal. IRAs are exempt from mandatory 20% federal withholding. In addition, the funds still will be eligible for rollover to a new employer's savings plan. Withdrawing money from an IRA should be considered only as a last resort because it jeopardizes your retirement. o Adjust withholding - While you're still at your old job, consider increasing the withholding allowances on your IRS form to decrease the amount withheld for taxes. But claim no more allowances than you are entitled to based on the worksheet found on IRS Form W-4. Since you may be out of work for a few months, your federal tax liability probably will be lower for the year. You can increase your withholding when you get another job. PROFESSIONAL STRATEGIES Outplacement - a checklist to prepare for transition: o List your dreams and desires. Why are you doing what you're doing? What would you rather be doing? What do you really want? Clarify your goals and values. o Prepare a resume of accomplishments and skills. Some find working in a large company narrows their skills; be sure to list your full range of talents and abilities. And don't make the mistake of selling yourself short! o Obtain copies of performance appraisals and bring them to interviews. o Compensation: Be realistic; don't price yourself out of the market. o Looking for work is a contact sport. The majority of jobs are still found by networking, so make a list of contacts and maintain them. But don't expect others to find a job for you. Ask your supervisor to send a letter of recommendation/reference to his or her contacts. Remember that classified ads contain only between 5% and 15% of job openings, and that companies that aren't advertising for hires may still want to hire you. Remain active and visible in professional organizations. o Negotiate your departure; don't immediately sign anything with your employer. Negotiate the kind of severance package you receive. Is there outplacement assistance? For how long? Can you choose the outplacement firm? Will your employer pay for job-search calls and trips? o Outplacement services can provide emotional support and help you fine-tune your resume and brush up on interviewing skills. They also will provide self-assessment programs to show you how to apply your job skills in different industries. Outplacement will not find you a new job. It will, however, help you clarify your goals, collect data on employers and market yourself. Some services offer classes, while others have individual counselors. o Consider alternatives. Is now the time to start a new business, go into private consulting or find a job related to a hobby of yours? Don't put yourself in a box; consider taking a new career direction. Will this require additional training or education? Will your employer pay for this in lieu of outplacement? o Obtain a list of employment lawyers if you feel you lost your job through discrimination or breach of contract. You may be able to negotiate a larger severance package. o Maintain a list of "headhunters" (corporate recruiters) who may be able to place you with a new employer. Rebounding o Losing one's job can be a large blow to the ego because people often define themselves by what they do for a living. It's helpful, support groups suggest, to write (in your private journal, if you keep one) about the experience. People are often angrier and more discouraged than they realize at the loss of a job. Self-esteem can be rebuilt with exercises that help you to realize what you've accomplished during your career and what skills and abilities you can offer a future employer.