Some steps to take for surviving loss of job


June 15, 2008|By EILEEN AMBROSE

Unemployment can strike anywhere, any time. And as we see right now, it's striking more often.

The national unemployment rate in May had its biggest one-month jump in more than 20 years, rising a half-point to 5.5 percent. The latest rate for Maryland is better - 3.7 percent in April - but it too is inching up.

If you're one of those statistics - or might be so soon - you need to quickly assess your finances and take steps to weather a temporary loss of a paycheck. That includes immediately cutting your expenses, talking to your creditors and looking for a new job. What you don't want is to spend months living off credit cards, getting way over your head in debt and ending up as part of another set of statistics - bankruptcy filings.

Here are steps to take to survive a job loss:

*Assess your finances. This is why financial advisers are always nagging us to set up an emergency fund with enough cash to cover three to six months' worth of living expenses.

"It just gives you some breathing room," says Steven Thalheimer, a Silver Spring financial planner. Unfortunately, he says, many people either don't have such a fund or the amount set aside is often too little.

Review your expenses and see where you can cut, like premium channels on cable TV, eating out and travel.

Trade in a high-priced car for a cheaper model.

Look at your sources of income, including severance, a spouse's income or investments outside a retirement account.

Unemployment insurance benefits run 26 weeks, although Congress is considering extending them. Marylanders can see if they're eligible for unemployment benefits online at

If money is tight, consider a part-time job or borrowing from family or friends.

It may be tempting to raid a 401(k) or individual retirement account. Consider these a last resort. You don't want to jeopardize your retirement. And this money doesn't come cheap. You generally will owe taxes on it and might have to pay an early withdrawal penalty.

You can, however, take out your contributions - though not earnings - from a Roth IRA without penalty or taxes at any time, says Scot Stark, a Baltimore County financial planner. And if you're 55 or older, you won't have to pay an early withdrawal penalty from a 401(k) if you lost your job, Stark says.

*Contact your creditors. Let them know as soon as possible about your situation. Creditors will be more willing to work with you if you haven't fallen far behind in payments.

Curtis Arnold, founder of, says credit card issuers want to keep good customers and might lower your interest rate, waive fees or set up a payment plan if you've lost a job.

And Mark Mendel, group vice president with M&T Bank, says the bank has a wide range of options to help homeowners. It may accept half-payments for a couple of months until you find work and can then catch up by making larger payments for a time. Or, it might modify your loan by reducing the interest rate and extending the term to reduce your monthly payments.

"Our No. 1 goal is to keep them in the home," says Mendel, adding the bank loses money on foreclosures. And if you prefer to sell the house, the bank has options for that too, he says.

Anne Balcer Norton, director of foreclosure prevention for St. Ambrose Housing Aid Center in Baltimore, says some lenders are committed to keeping consumers in their homes, but others are unresponsive. Besides contacting lenders early when you have financial trouble, you should also seek assistance from a housing counselor, she suggests. Marylanders can find a counselor by calling 877-462-7555 or going online at

*Start looking for work. Do it immediately, even though it may be emotionally difficult. Losing a longtime job is akin to losing a loved one, says Karen Sitnick, director of the Mayor's Office of Employment Development.

"People actually go through a grieving process," and experience different stages of grief, she says.

"They do have some control of how long these phases can last," she adds. "Grieve, accept it and move on."

Make use of any job training or placement assistance offered by your former employer or in your community.

Baltimore City, for instance, offers three One-Stop Career Centers where you can find out about job openings and career training, take computer classes, brush up on interviewing skills and get help preparing a resume. Find the location of these centers and 29 others throughout Maryland at

In the best of a bad situation, your employer will give you notice far in advance that cutbacks are coming. This gives you time to prepare.

That happened to Daniel Reese, a former manager with JPMorgan Chase in Baltimore. The company last year warned workers about six months ahead that it planned to close its downtown check processing facility.

In those months, Reese and his wife paid off their credit cards and car loans and refinanced their mortgage for a slightly better rate.

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