HUNTSVILLE, Ala. (WAFF) – Losing or transitioning jobs can be stressful, not just emotionally but financially. While no strategy can completely eliminate the uncertainty, taking proactive steps can help soften the impact and set you up for a smoother transition. Marshall Clay, a financial advisor with The Welch Group, offers a checklist to consider when facing a job change.
1. Build an Emergency Cash Reserve
Before making any major career moves, ensuring you have an emergency fund in place is wise. Clay suggests a minimum of three months’ worth of living expenses, though six months is ideal. This financial cushion can help bridge the gap between jobs.
2. File for Unemployment
While unemployment benefits may not fully replace your salary, they can provide temporary relief as you search for a new opportunity. Clay recommends filing as soon as possible to take advantage of this resource.
3. Consider a Home Equity Line of Credit (HELOC) Carefully
For those who own a home, a HELOC can provide access to funds, but it’s not without drawbacks. “A HELOC is a potential option, but interest rates are high right now—around 7%—so it should be used cautiously,” Clay warns. If borrowing is necessary, understanding the long-term impact of interest costs is crucial.
4. Tap Investment Accounts Only as a Last Resort
While it might be tempting to dip into investment or retirement accounts for immediate expenses, Clay advises against this unless absolutely necessary. “Short-term needs may take priority, but touching investments should be a last resort,” he says. Withdrawing funds too soon can trigger penalties, taxes, and missed growth opportunities.
5. Review Your Health and Life Insurance
Losing a job often means losing employer-provided benefits, such as health and life insurance. If possible, explore options to extend coverage through COBRA or private health insurance exchanges. For those with a spouse who has employer-sponsored coverage, joining their plan may be the most cost-effective solution.
6. Don’t Forget About Your 401(k)
Many employees contribute to a 401(k) while working, but what happens to those funds after leaving? “Leaving your 401(k) behind can be detrimental,” Clay explains. After addressing immediate financial needs, be sure to roll over your 401(k) into a new employer’s plan or an individual retirement account (IRA) to maintain control and visibility over your investments.
To learn more about The Welch Group, click here.
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