On average, people will change jobs 10 times during their lifetime. Whatever your reason for switching jobs—whether it be a desire for a new career path or the result of a downsizing effort—it can be a stressful time. If you find yourself at a career crossroad, the first thing you can do is take control of your finances.
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Here are some tips for managing your finances during a career transition…
1. File For Unemployment Benefits Immediately
To qualify for unemployment insurance, your previous employer must confirm that you were laid off. Since each state has different eligibility requirements, you can visit the Department of Labor Web site (www.dol.gov) to obtain information regarding your state.
2. Understand Your Severance Package
Some companies allow you to negotiate a severance package. Make sure you get reimbursed for outstanding vacation days and expenses. See if your stock options have vested in order to sell them.
3. Health Insurance
When you get laid off, your health insurance may end immediately. One option is COBRA, a federal program that allows you to continue group plan coverage.
The coverage period for the federal subsidy is nine months and the eligible period for COBRA is 18 months. The recipient must meet certain requirements, for more information and eligibility requirements, please contact the Department of Labor at www.dol.gov.
4. Retirement Accounts
Consider rolling over eligible assets into a new employer’s plan or into an IRA. You need to check with your previous employer regarding eligibility and retirement account options. In addition, you should take into account any potential tax consequences, as well as expenses and sales charges and/or penalties for selling or buying investments before initiating a rollover.
5. Reduce Spending And Avoid Debt
Take a look at your monthly expenses and see here you can cut costs. Contact your credit card company to see if you can reduce or defer your payments. You may have to give up such luxuries as cable TV, cell phone, or entertainment.
6. Take Inventory Of Your Assets
Find out exactly how much you have in stock options, mutual funds, savings accounts, checking accounts and retirement accounts. This will help you find out exactly where you stand financially.
3 Things You Shouldn’t Do
Here are some things you should avoid doing during a career transition:
1. Withdraw From Your 401(k)
Times may be tough, but resist the urge to take money out of your 401(k). You will get hit with income taxes and in some cases a 10% penalty.
2. Rely On A Home Equity Line Of Credit (HELOC)
It will be extremely difficult to obtain a home equity loan while unemployed. But if you already have one, be careful when tapping into it. You could be without a job for a lengthy period of time.
3. Abuse Your Credit Cards
It may be tempting to purchase everything with your credit card, but that can be a mistake. Most credit card companies will raise your interest rates if you miss one payment.
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