job loss

How to Prepare When Your Unemployment Is Ending

Denise Hill — Mon, 21 May 2018 08:31:21 +0000

Losing a job can be devastating. It can throw your life into a tailspin and severely delay or even kill your progress and plans for the future. Once you receive a little help through unemployment compensation, you may find yourself right back where you started when the benefit ends.

You may have been blindsided when you first lost your job, but losing unemployment before you've found a replacement job can also be a sucker-punch. As difficult as it all is, you still have to will yourself into being proactive. Here are a few things you should do to prepare for the end of unemployment compensation.

Begin with the end in mind

The best thing to do immediately after you receive your first unemployment check is to plan on not receiving it. It is a great aid that can help keep you afloat until you find work. But, you must keep the fact that it is only temporary in the forefront of your mind. During normal economic times, unemployment lasts 26 weeks, or six months. (See also: How Long Can You Really Live on Unemployment?)

Reduce your spending and live off as little as possible. And do your best not to depend on the benefit. The benefit itself makes this easier because it usually isn't enough to cover all of your living expenses. It is only assistance — similar to someone helping you up when you trip and fall. They help you to your feet. They don't carry you.

You have to find a way to cover the shortfall and generate your own income as quickly as possible. Put yourself on a shoestring budget. Establish spending and payment priorities, because some things may have to go unpaid. Call your creditors now and alert them to the situation and try to maintain a good relationship with them throughout the process. Downsize. Sell stuff. Get a side gig and do odd jobs. Unemployment can temporarily stop or at least slow the bleeding, but remember — it's only temporary. (See also: 5 Budget Overhaul Tricks for the Recently Unemployed)

Make getting a job your top priority

Job loss is so devastating because it is a loss — economically and emotionally. Dealing with the hurt, betrayal, and disappointment is a massive task by itself. Add to that coping with money issues and the instability it causes, and you've got a deep hole to climb out of. This can make looking for another job seem like a herculean effort. Try and view your unemployment compensation as a safety net and springboard. It helps ease the financial burden and it should propel you to action.

As the six-month period begins winding down, try adjusting your employment search to include jobs you wouldn't normally consider. Think outside the box. You may even have to get two jobs temporarily to help stay afloat. The closer you get to the benefit expiration date, the less picky you should become. Get training, attend job fairs, and leverage your networks and professional relationships to assist you during your hunt. You have to be aggressive, persistent, and diligent. (See also: 7 Networking Tips for the Recently Unemployed)

Get help

Federal and state-funded assistance programs are available specifically to help you through this period. Sadly, these programs' processes can be slow, bureaucratic, and inefficient, which is why it is imperative that you start the process ASAP. Benefits and programs vary by location, so be sure to check with your state's local agencies to understand requirements and procedures.

Supplemental Nutrition Assistance Program (SNAP)

Formerly known as the Food Stamp Program, SNAP provides food purchasing assistance to families in need. The amount you receive is based on your household size, income, and expenses. If you qualify, this could be a great way of ensuring your family is fed. It can also free up some cash enabling you to repurpose the grocery money and use it for another need. The benefit can be used at a host of traditional grocery stores, convenience stores, and even at your local farmers market.

Self-Employment Assistance Program (SEAP)

Have you ever heard the saying, "If you can't find a job, create one?" That's exactly what SEAP is designed to help you do. SEAP is a state-funded grant program specifically designed to train individuals receiving unemployment the basics of launching their own small business. And the best part about this program is that in most states, participants are not required to look for a job. The training program is your employment seeking activity. To find out if you qualify, check with your local unemployment office.

Housing assistance

If you foresee yourself struggling to pay rent or your mortgage, help is available. The Department of Housing and Urban Development (HUD) offers a number of rental assistance programs including the Housing Choice Voucher Program. This voucher program provides assistance by paying all or a portion of your rent, if you qualify. Most states also have some sort of Emergency Rental Assistance Program which provides short-term, income-based assistance. And the federal government offers assistance to those in rural areas through its Rural Rental Assistance Program.

If you are struggling to make mortgage payments, the Federal Trade Commission offers protection for distressed homeowners from predatory and unscrupulous lending practices. There are a lot of private and nonprofit agencies that can help you refinance, negotiate a short sale, and/or keep your home if you fall behind. The key is to do your research. Understand what you are signing. And don't make decisions out of fear or under pressure. You have options. Breathe, consult an objective expert, and move forward with what works best for your situation.

Nonprofit and social service agencies

Every state has a different suite of services and resource offerings for those in need. Finding those resources can be difficult — especially when you don't know where to look. 211.org was established to address this need. It is a repository of information containing resource offerings for every state and parts of Canada. It is a free service that can help you find federal, state, local, nonprofit, and (small) fee-for-service assistance. It doesn't matter if you get help from family and friends, your church, or a federal or state source, as long as you get help.

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This article is from Denise Hill of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5-Minute Finance: Start an Emergency Fund

Rachel Slifka — Thu, 22 Mar 2018 09:00:06 +0000

According to a recent study by Bankrate, most Americans are drastically unprepared when it comes to emergencies. Only 39 percent of respondents claimed to have enough money in savings to cover an unexpected $1,000 expense.

You can protect yourself from tragedy by starting an emergency fund today. It takes less than five minutes to set one up, and the practice of stocking your emergency fund can ensure you are always financially protected, even in the worst of situations.

Here's everything you need to know about emergency funds and how to set one up in five minutes or less.

What is an emergency fund?

When disaster strikes, will you be ready for it? An emergency fund can protect you. In short, an emergency fund is money set aside specifically for emergencies or unexpected expenses you wouldn't have budgeted for otherwise. For instance, a medical bill, job loss, or major car repair could be considered an emergency expense.

Instead of dipping deep into savings or putting an emergency on a credit card, with an emergency fund, you are already prepared with cash in hand in the event of an unexpected, urgent cost. There is no set amount that constitutes the perfect sized emergency fund, though many finance experts agree you should strive to save between three and six months' worth of regular living expenses.

Why you should start an emergency fund

By starting an emergency fund, you are protecting yourself and your family from disaster and/or debt. If an emergency situation arises, you know you will always have the means to pay for the service or good you need. The last thing you want to be worried about is money.

Failing to have an emergency fund can come with a big cost. Many people, having no other options, put the expense on credit cards, which can take years to pay off. Others try to file for a hardship withdrawal from their employer-sponsored 401(k), which has major tax implications. In the most dire of cases, people even file for bankruptcy. If they would have just built up an emergency fund, many of these cases could have been prevented.

How to start an emergency fund

It only takes a few minutes to start your own emergency fund. Simply open up a new savings account and deposit whatever money you can. Keep in mind, it's a good idea to keep your emergency fund separate from your regular savings account so you lessen the temptation to spend the money on everyday items.

After you have started to save money, leave the cash alone. It may be tempting to spend the money on a more immediate expense, but remember, this money should be socked away for true emergencies only.

Next steps

To build your emergency fund more quickly, you can enroll in an automatic savings plan, which is an option at most banks. With this plan, you can choose to have money automatically deducted from your regular savings or checking account and put straight into your emergency savings. Automatic savings plans are a great option for anyone who may be tempted to spend the money otherwise, or who likes to automate their finances as much as possible.

Additional resources

This article is from Rachel Slifka of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Ways to Boost Your Financial Resilience

Denise Hill — Tue, 20 Mar 2018 09:00:06 +0000

The ability to bounce back after being financially sucker punched is a necessity in today's volatile financial climate. It's safe to say that at some point in your life, you are going to face a financial crisis. It could come in the form of a job loss, an unexpected pregnancy, a health crisis, divorce, death of a loved one, identity theft, a global recession, the stock market tanking, an act of God … you get the picture. And the most troublesome thing about a financial crisis is it is usually unexpected and beyond your control.

The ability to survive and recover from a significant financial setback depends on how well you are prepared before disaster strikes and how flexible and proactive you are during and after the event. While you can't predict, control, or prevent financial catastrophes, there are a few things you can do to increase your financial resilience.

1. Prepare

According to a 2017 report by GoBankingRates, 39 percent of the 8,000 Americans surveyed had zero savings — and 57 percent had less than $1,000 set aside. That means nearly two-thirds of the people surveyed could not withstand a significant financial setback.

Your ability to rebound after a major money event is directly proportionate to your financial health before the event occurs. If you have little or no money saved, have lots of debt, and fail to live by a budget, you significantly extend your recovery time.

All of the standard financial best practices — budgeting, establishing an emergency fund, keeping your debt-to-income ratio low, and living below your means — increase your financial resilience. Financial irresponsibility is costly, both now and long-term. Start working now to improve your financial situation. Establish a solid emergency fund, lower your cost of living, and pay off as much debt as possible. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

2. Practice

In the world of competitive sports, practice is important for three reasons. First, it prepares you for competition. Second, it creates muscle memory and habits. And third, it predicts future performance. In other words, you perform how you practice. This same thinking should be applied to your finances.

How does one practice for a financially stressful event, you ask? The first thing is always, always, always live by a budget. Budgeting gives you the power to see and decide where your money goes. You should make it a habit to establish a system of budgeting and tracking every dollar you receive and spend. It establishes a habit of being financially proactive which is pivotal in a crisis.

Another way to practice for a financial surprise is by running regular "practice drills." A few times a year my husband and I engage in what Michelle Singletary, nationally syndicated columnist for The Washington Post, calls a financial fast. During our fasts, we cut out all unnecessary spending and only buy the absolute necessities for a short period of time (about a month). We tighten our belts and live as frugally as possible. We usually wind up saving an extra $200–$400 on top of what we already save. It allows us to see the areas where we can cut back and it keeps us in the habit of adjusting our spending and living on less. (See also: Here's How a Spending Ban Can Help (and Hurt) You)

3. Don't panic

When a financial storm does arise, don't panic. The worst thing you can do is to act prematurely and while under duress. When you are stressed and scared, you are not only more susceptible to making poor decisions, but you are also vulnerable to financial predators. Scammers, con-artists, and unscrupulous lenders feed on your fear and can turn a bad situation into a disaster.

It's important to assess your situation and explore all of the possible solutions before deciding on a course of action. Seek sound, objective financial advice. Don't overcorrect and make the situation worse by prematurely borrowing money from your IRA or taking out a second mortgage. There may be less costly options available to you.

And don't be afraid of unconventional solutions. There may be smaller things you can do to keep you from having to make drastic and more costly decisions. Consider things like adjusting your insurance coverage and deductibles, adjusting your tax withholdings, or even selling your car. The important thing is to stop, breathe, and remain open to considering a multitude of possibilities before you act. (See also: How to Protect Yourself From Predatory Lending)

4. Prioritize

Establishing your financial priorities before a disaster occurs is so important. You should always plan to cover your basic needs: food, housing, transportation, etc. If you are unable to afford the basics, look for programs that aid with these things such as a food bank, rent/mortgage assistance, and public transportation. Keeping yourself and your family alive, safe, healthy, and functional must be your top priority.

From there, begin to make a list of the order in which you will pay and skip bills. Yes, you read that correctly. In a time of crisis, some things may have to go unpaid for a time. It's important that you prioritize and pay the things that need to be paid in lieu of randomly paying things as they become due. Opting to pay your store credit cards and cable bill and foregoing the mortgage or rent is a bad idea, but is an easy mistake to make when you don't have a plan. (See also: Pay These 6 Bills First When Money Is Tight)

Lastly, make a list of the order in which you will do things (exhaust the emergency fund, sell the car, get a second job, begin skipping bills, etc.). Having a plan helps ward off panic; it helps you make sound decisions and ensures that you can make the right adjustments as the situation changes. Make sure you run your plan by someone astute in money management who will help you make the best decisions for your circumstances. (See also: 4 Times Raiding Your Retirement Accounts Early Is Okay)

5. Be proactive

The most important thing to do before and during a financial problem is to be proactive. It sounds like basic advice, but being assertive and mustering up the strength to act is difficult during a crisis. Most major events bring with them a grieving process. Trying to be strategic — heck, just trying to function — during a difficult time isn't easy. You've got to acknowledge and accept that the crisis is real and begin damage control as you cope with your grief.

Being proactive early in the process allows you to chart a course of action. You can contact creditors and arrange to pay late or make partial payments and find out what other courses of action are available. You should begin the proactive process by revising your budget to reflect the loss of income or new expenses and stop any unnecessary spending immediately.

After you've prepared your financial ship for battle, start looking for solutions specific to your situation. Make sure you understand your insurance policies, file for unemployment or disability benefits, research treatment options and alternatives, and get a second opinion. It is also a good idea, especially when dealing with tax and/or legal issues, to consult a professional. Arm yourself with as much information as possible before you act and be sure you weigh the benefits of each decision. Remember the key here is to survive the storm and live to fight another day. (See also: What to Expect After These 5 Personal Financial Disasters)

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This article is from Denise Hill of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

9 Times Life Can Throw Retirement Off Course

Tim Lemke — Thu, 08 Mar 2018 09:00:09 +0000

Saving for retirement requires discipline. Ideally, you are able to amass a nice nest egg by putting aside a big chunk of money each month and investing it wisely. But it doesn't take much for you to get off track. Life happens, and you are often faced with expenses and other burdens that make saving for retirement less of a priority.

But you needn't let life get in the way of your long-term financial goals. With some planning and good decision making, you can continue to save regardless of what comes your way.

Here are some things that can throw your retirement planning out of whack, and how to deal with them.

1. Job loss

If you suddenly find yourself out of work, it can be a huge blow to your retirement savings because you no longer have income you can set aside. You are no longer able to contribute to that company's 401(k) plan, and you lose any matching or direct contributions that were coming from your employer.

An extended job loss could result in the loss of tens of thousands of dollars in retirement savings over time. However, you can always contribute more to your 401(k) plan later to catch up once you get back to working, and if you have a large enough emergency fund (at least three to six months' worth of income), you may still be able to contribute to retirement through individual retirement accounts (IRAs) or taxable brokerage accounts.

A job loss can hurt, but if you are relatively young and have a lot saved already, the loss of a few months of retirement contributions won't make too much of a difference in the long run.

2. Divorce

Dissolving a marriage is a tough choice to make, and it's one that can be fraught with financial implications. There could be large upfront legal costs associated with the divorce itself, and the long-term impact can be significant. Suddenly, your household income has been split in half while you each now have to pay for your own separate housing costs, utilities, and meals. You may be on the hook for child support or alimony payments. And now the combined retirement nest egg you were counting on has been slashed. When this happens, it's hard to think about retirement savings.

You can protect your retirement, however, by avoiding the temptation to cash out accounts upon your divorce. Some couples have unfortunately been known to do this during the asset-splitting process, resulting in huge capital gains taxes and penalties (plus the loss of any potential earnings from that money).

If you and your spouse are considering divorce, be sure to think hard about the financial implications. If you do decide to separate, don't lose sight of the importance of saving for retirement, despite the new challenge in doing so. (See also: How to Protect Yourself Financially During a Divorce or Separation)

3. A major emergency

You suffered a significant injury and only part of your medical bills were covered by insurance. You totaled your car. Your house was gutted by fire. When these things happen, retirement saving may be the last thing on your mind. In fact, if you are not prepared, you may end up raiding your retirement funds to pay your bills. This could mean penalties and taxes and years of potential lost income.

You can continue to save for retirement, however, if you've built up a significant emergency fund. Three to six months' worth of income is a good rule of thumb to cover whatever unexpected costs you may have. With a good emergency fund, you may not have to raid your retirement funds at all, and may even be able to continue contributing at the same level. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

4. Having a child

You and your spouse are rolling in dough, pumping those retirement accounts to the max and watching the savings grow at a rapid pace. Then you decide to have a baby. In case you weren't aware, kids add cost. The United States Department of Agriculture calculates the average cost of raising a child from birth through age 17 to be $233,610. So you can imagine how having a kid could throw your finances off track.

If you are thinking of having a child, you need to plan for it financially, by either boosting your income, cutting back on other expenses, or (ideally) both. If you think you can put off saving for retirement until the kids are out of the house, that's a big mistake. (See also: 7 Signs You're Financially Ready to Start a Family)

5. Going back to school

There may come a time in your life when you feel a desire to finish college or get an advanced degree. Certainly, education can be the key to developing a great career and stable finances. But you still need to be smart about it.

Our nation is filled with young people who are crushed by student debt and unable to even consider saving for retirement. If you're heading back to school, make sure you're pursuing something that can actually pay off in the form of a better career or higher-paying job. Try to avoid taking out burdensome student loans, if you can. Examine if it's possible to continue working while pursuing the degree so you're not losing income.

Your early years are the best time to save money for retirement, because your money has time to grow. Don't let higher education be a burden in your efforts to save.

6. Caring for an older parent

Your parents spent a couple of decades taking care of you, and now it's your turn to look after them. It's never easy to watch your loved ones deal with health problems as they age, and it can be a source of both mental and financial stress. You may choose to have a parent move in with you, or you may have to take time off work to search for other care options. You may need to pick up a share of their medical bills, or take care of other affairs, like selling their home. All of this can throw a curveball to your own retirement savings.

To avoid any serious financial strain, it helps to plan ahead and have some savings set aside to care for your loved ones. It also helps to have a conversation with your parents early on to make sure they have the financial resources to cover their own expenses as they age. (See also: 6 Financial Steps to Take When Your Aging Parents Move In)

7. The market crashes

It's a bummer to see a chunk of your retirement savings wiped away when the stock market goes down. You may feel like all of your efforts to save were for nought. But that's the wrong attitude.

When investing, you should always be aware that the market could go down at any time. If you are close to retirement age, work to make sure your portfolio is heavier on bonds and cash than more volatile stocks. If you are further away from retirement, don't panic. Remember that the market has always rebounded, and you can take advantage of the fact that investments are cheaper than they were. (See also: 6 Confidence-Inspiring Facts About the Stock Market)

8. Buying a house

It's very common to see your housing expenses rise once you move from renting to homeownership. Many people will stretch their budgets to get the home they want, and also fail to take into account property taxes, mortgage insurance, community fees, and the cost to maintain the home. If your housing expenses are now higher than in the past, you may now have less money available to set aside for retirement.

To avoid this, don't buy a home that will dramatically increase your monthly housing costs. Look to save as much of a down payment as possible before purchasing, and work to get the lowest interest rate you can. Homeownership is a key part of obtaining financial freedom — it should not be something that prevents you from achieving your financial goals. (See also: 4 Easy Ways to Start Saving for a Down Payment on a Home)

9. Moving to a more expensive area

You decided to move into the city because it's closer to work and offers a more vibrant social scene. But before long, you realized that it's really putting a dent into your finances. Your cost of living has shot up, leaving you with less money available to save for retirement.

If this happens to you, it's time to reevaluate your overall financial picture. Track your expenses and see if it's possible to cut some costs. Look for a cheaper apartment. Consider walking or biking to work instead of driving. Be smarter about what you spend when going out with your friends. Don't let your desire to live the good life now crush your ability to save for the future.

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

What to Expect After These 5 Personal Financial Disasters

Annie Mueller — Mon, 11 Sep 2017 08:00:05 +0000

Financial hardships can happen despite the most careful planning and saving. If you're facing a crisis, read on to learn what you can expect to happen and how you can handle these challenges. There are always options, and you can recover from even the most feared financial situations.

1. You've lost your primary source of income

There are many reasons why you might be facing a sudden, devastating loss of income. Sometimes family, personal, or medical situations make it impossible for you to continue working; in other cases, the job itself ends, and you have to start over again. Losing your primary income source, of course, hits you hard financially. Other income — a partner's salary, perhaps, or side job — can help alleviate the financial impact. But that help is usually limited, either in amount or in duration. Here are a few things you can expect to happen.

Loss of savings

Losing your income means you quickly start relying on your emergency fund and any other savings you've accumulated. If you're able to quickly reduce your expenses, you can make your savings last longer.

Increased debt

If your savings aren't adequate, or if you face unexpected financial needs, you may find yourself debt-dependent in order to handle incoming bills. The worst case scenario is when you have to rely on high-interest debt (such as credit cards) to keep up.

Financial stress

Dealing with income loss, financial insecurity, and all the changes you have to make as a result quickly leads to stress. Stress, unfortunately, is no friend to you and decreases your ability to make smart, long-term decisions.

Change in lifestyle

You'll need to cut your expenses as much as possible to handle income loss; though these changes aren't necessarily bad, they can cause emotional pain, personal discomfort, and induce more stress. Change is difficult even in positive circumstances, and change induced by financial crisis exacerbates stress and insecurity.

What you can do

There are many ways you can positively handle a loss of income:

Do your best to reduce your immediate expenses, even if only temporarily.
Call and negotiate for delayed payment plans with creditors or other major billers. (See also: Pay These 6 Bills First When Money Is Tight)
Get some money coming in; even a small amount of what you used to make will help you deal with bills and expenses. (See also: How to Come Up With $1,000 in the Next 30 Days)
Reach out to your personal and professional network for work opportunities.

2. You've defaulted on a loan

Defaulting on a loan feels like one of the worst possible financial situations. However, getting in over your head financially can happen to anyone. It doesn't have to end your financial future, but it will have some impact on your financial present. Here's what can happen after defaulting on a loan.

Lowered credit score

Late payments, missed payments, and account closures on debts can all bring your credit score down. A low credit score isn't the end of the world, but it will limit your ability to establish credit, get loans, or even rent a house or buy a car.

Calls from collection agencies

Different lenders have different rules, but after some period of nonpayment, your loan will most likely be passed on to a collection agency. While some agencies maintain a professional tone and approach, some do not and might become intrusive or aggressive. Even with courteous collectors, it's stressful and unpleasant to get letters and calls demanding debt repayment you know you can't afford. (See also: Account in Collections? Here's How to Fix It)

Repossession of collateral

If the loan you've defaulted on has collateral — such as a mortgage or car loan — you may find yourself facing repossession. Home foreclosure is usually a last resort, as it's messy and costly for mortgage companies to handle.

What you can do

The best way to handle defaulting on a loan is with proactive negotiation. Try these steps:

Negotiate a payment plan for delayed and/or split payments in order to avoid collection agencies.
Negotiate a debt settlement with the bank or credit holder. You'll usually need to make a cash payment, but only for a percentage of the total amount owed in order to clear the debt entirely.
Contact your mortgage company if the loan defaulted on is your house mortgage; explain your situation and ask them to help you work out an affordable, alternate payment plan. They don't want your house; they want your cash, and they may be willing to negotiate terms and minimum payments.
Examine options to consolidate all your debt into a single, smaller payment you can afford.

3. You've lost money in an investment

So you took some of your hard-won savings and decided to invest. Maybe it was in a friend's startup, a real estate project, or a stock that seemed like a sure thing. It didn't work out, and now you've got to handle the fallout. Assess the impact and start taking positive steps forward. Here are a few things you might initially face:

Loss of money

The most obvious consequence, of course, is the loss of your money; that hurts. Remember, however, that just as you lost money, you can also invest and save money. One painful investment loss does not poison the rest of your savings or investments.

Loss of confidence

The psychological impact of a bad money move can make you doubt your own financial prowess and decisions. It's okay to question yourself, but you want to learn, not stay stuck. (See also: Your Loss Aversion Is Costing You More Than Your FOMO)

Smaller retirement savings

If you were counting on the return from this investment as a key part of your retirement savings, you're now facing a major blow to your retirement plan.

Less ability to invest

A loss of money means, of course, lowered liquidity. You may not be financially able to build up savings quickly, which reduces your ability to invest and start rebuilding your portfolio.

What you can do

You don't have to run away from investing (nor should you!) because you made one choice that didn't work out. Start proactively using these options to recover:

Meet with a financial planner to assess your options and go over any lingering financial questions or doubts.
Rebuild emergency savings, if you've used them up as part of your investment.
Lower expenses or increase income to replace what you've lost, by cutting back on expenses and adding in some side work for a while.
Keep your savings steady; build up to a minimum investment amount and examine the safest high-yield options for your next investment.

4. You've racked up high-interest debt

It's never the plan to get stuck with high-interest debt. But with the right (or wrong) combination of life events and decisions, you can find yourself there. High-interest debt is a particularly bad kind of debt: If you can't make more than the minimum payments, your debt will continue to grow at a very fast rate. It's likely you'll be facing some unpleasant consequences such as:

Poor credit score

If you've made a late payment or missed one altogether, your credit score can be affected negatively. And if you've accumulated more debt than you can manage, and you're frequently missing payments while you try to keep up, your credit score can take a big hit.

Loss of opportunities

When you're struggling to keep up with debt payments, you're limited. Whether it's an investment opportunity or the chance to enjoy some time off with friends, the burden of high-interest debt can keep you from affording the opportunities that come your way.

Financial embarrassment

Many people still struggle with feeling ashamed or embarrassed about having debt, even though having debt — a lot of it — is quite common. In fact, according to a 2017 poll conducted by Northwestern Mutual, 40 percent of Americans spend about half their monthly income on debt payments.

What you can do

Being burdened with high-interest debt may feel like a problem you can't solve, but there are steps you can take to reduce its impact on your life. Start with these actions:

Communicate with the debt holder if you've fallen behind on payments. You can often negotiate a split or delayed payment, as long as you can guarantee a payment of some kind.
Learn about debt repayment strategies and which one might work best for you.
Whatever you do, don't add any more to your debt! Put away any active credit cards and reduce normal expenses so you can live on your income without adding more debt to your life.

5. You're recovering from a divorce

Divorce not only has a huge impact on your emotional and psychological state, but also on your financial well-being. First, divorce itself is expensive; the average cost is between $15,000 and $20,000. In addition to footing your part of that bill, you might also face some of these huge costs:

Disproportional expenses

You might find that your expenses, carried over from your pre-divorce life, exceed your current, post-divorce income. You can reduce or eliminate expenses, but sometimes you're locked into agreements (such as a lease or a cellphone service contract) that keep you at a higher expense level than you can reasonably afford.

Lowered investment returns

If you and your former spouse were contributing to a joint account, you'll have to divide that up somehow in the divorce proceedings. If it's an even split, your half in an account by itself will produce reduced returns.

Big tax bills

If part of your divorce was to liquidate and divide all assets, you might be in for an unpleasant surprise when tax time rolls around. You may have to pay a hefty capital gains tax on certain investments or other assets that have been liquidated.

What you can do

By taking some smart steps forward, you can reduce the negative financial impact that a divorce has on you. Make these moves to take control of your financial life, post-divorce:

Meet with a financial consultant as soon as possible to develop a plan for maximizing your investments and keeping your retirement savings on track. (See also: 5 Money Moves to Make the Moment You Decide to Get Divorced)
Call and negotiate with contract holders to eliminate any lingering, too-high expenses. There may be a buyout option you can take.
If possible, delay liquidation of shared assets or investments until you fully understand the taxes or fees that you'll face when they are liquidated. (See also: How to Protect Yourself Financially During a Divorce or Separation

It's not easy to recover from a financial disaster, but recovery is always an option. The most important things you can do are, first, face the situation squarely in order to figure out what your best options truly are. You may have more than you think.

Secondly, don't be afraid to ask for help, which doesn't necessarily mean asking for money. Rather, you may be able to get help from your creditors (lowered payments), from your network (job opportunities), from your local community (selling your car, building a side hustle), and more.

Moving forward and rebuilding takes time, but it's within your power.

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This article is from Annie Mueller of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Networking Tips for the Recently Unemployed

Paul Michael — Thu, 07 Sep 2017 08:31:07 +0000

Through no fault of your own, you find yourself unemployed. After the immediate shock, how do you start to look for work and connect with people who can get you back into the nine-to-five? Here's some much-needed advice.

1. First, take a breath

Before you go diving into social events, sending out mass emails, and making panicked phone calls, you need to take a little time to regroup. Losing a job is a traumatic experience, and you need to give yourself time to decompress, regroup, and reevaluate.

We're not talking about two worry-free weeks vacationing on a beach in Cancun. This is more about not jumping into the stress and fatigue of a job hunt immediately after the stress and fatigue of a job loss. Do anything but networking for the first few days, whether it's spending a week at home tidying up or hanging out with family, heading to the mountains for a weekend, or visiting relatives in another state.

2. Get your ducks in a row before talking to anyone

Now, you're ready to get back in the game. Before you make a call or send an email, you have to be prepared. Is your resume up to date? Do you have a personal website that hosts samples of your most recent work? Do you have all the files needed from the office? If not, you may be able to ask human resources to send you whatever you need; after a layoff, some companies are happy to help employees with the transition (if you're fired, it's a different story).

Make sure you also know exactly what you'll say to people. How will you explain being out of work? Why were you let go? Do you even want to bring it up? Some employers may see a layoff as part of life, others may think you were expendable for a reason. You want to have your answers rehearsed, and never play the victim. Don't go jumping into calls unprepared; you only get one chance to make a first impression.

3. Start with people you know well

It may seem like stating the obvious, but when anyone is laid off, they are not always thinking clearly. Often, the first thing people do is to start applying for jobs, and that's all well and good. But your own network of friends, colleagues, and even relatives may have just what you need to get ahead.

So, call or email (calling is better) your top prospects. These are people you know well, you share a great relationship with, and potentially have leads for you. If they aren't directly connected to the industry you work in, they could very well know someone who is. And a lot of the time, these kinds of connections lead to job openings that have not even been posted on the employment sites yet.

4. Use sites like LinkedIn to connect with new contacts

LinkedIn is a great way to make new contacts through your existing networks of colleagues and friends. And if you really don't have any kind of connection with anyone, you can still ask to be linked to them. People like to build their networks, and it's usually easy enough to connect and send a message. Don't be shy about telling people your current situation and what you are looking for. If they're not hiring, they may know someone who is. You can also use other social media sites, like Facebook, Twitter, and Instagram, to let people know you're searching for work.

5. Attend local networking events

In almost every city, you will find opportunities to meet up with people who are in your industry. You can start by looking at a site such as Meetup, which gives you access to hundreds of different groups that meet regularly in your area. This is not just for people who like football or book clubs. The vast range of subjects to choose from makes it easy to hone in on your field, and talk to people who may have opportunities for you.

6. Join online forums and industry-related sites

Online forums are a great way to get advice. If you do an online search for your industry of choice, you should find a few active forums quickly. Also, a site like Reddit has sub-pages (subreddits) on thousands of careers. Join that subreddit, and start commenting and posting as soon as you can. You may quickly connect with someone who knows of a job opening.

7. Do not be afraid to take a break

This is crucial. You can suffer from networking burnout if you go all-in, trying to contact as many people as you can in the first week of your job search. Attending events, making calls, crafting resumes, writing emails, and chatting in forums is a lot of work. And it can also cause you to become incredibly deflated and discouraged when you get very little response in return.

The truth is, in almost every industry, you are up against some stiff competition. It can take months to get a great lead that turns into a job interview and offer of employment. So, when you start to feel the pressure, take a day off. Do something that lets you decompress a little. Finding work is a job in and of itself, and you should give yourself the downtime you need to stay healthy and optimistic.

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This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Handle a Sudden Loss of Income

Annie Mueller — Thu, 17 Aug 2017 08:30:10 +0000

Life happens. Sometimes, life can throw a sudden job loss or drop in income your way. Beyond saving up an emergency fund, you'll need to make a few key moves while you stay afloat. These steps will help minimize the damage and stabilize your finances, quickly.

Alert the people who need to know

There are some exceptions to this rule, but it usually pays to be proactive and honest about your financial situation. If you make the first move and have an honest talk with your landlord, for example, you might be able to negotiate a reduced rent for a few months, set up a split payment agreement, or mutually decide on a later due date for the payment. If you wait until the rent is overdue, and your landlord's patience is already stretched thin, those negotiations might not go so well.

It can be intimidating to initiate these conversations; there's no guarantee they'll go your way, and it's humbling to admit that you're struggling financially. However, it's worth the effort. The worst you'll get is a, "No." In the best case scenario, you may gain some extra time, waive some late fees, or find a much-needed reduction in what you have to pay.

Put payments on hold

If you have automatic payments, particularly large ones, call your bank and put them on hold. While your income is low, you need to assess and prioritize each payment you make, rather than let things flow automatically. You'll also avoid potential overdraft fees by holding those automatic transfers or payments.

Some banks charge a fee for putting payments on hold; if that's the case, see if you can put the payment on hold from the payee-side of things rather than through the bank. In other words, if you have an automatic payment scheduled to your insurance provider, for example, and the bank will charge you to put a hold on that auto payment, call your insurance provider and cancel the automatic payment plan until you're ready to reinstate it.

Be sure that you keep a spreadsheet or other record of all the payments you put on hold; they still need to be paid. You're just going to manually send those payments according to the best timing for each one. Don't lose track of the payments that need to be sent: Note the amount, the payee information, and the due date for each payment.

If you know you'll be late on a bill or payment, call ahead. You may be able to negotiate a temporary, reduced payment plan for credit card debt, car payments, or other bills. Most companies would rather have some money than no money and will work with you, at least to some extent. (See also: Pay These 6 Bills First When Money Is Tight)

Reduce your expenses

Take a good look at your budget and cut out all but the essentials. This usually means that you're paying bills and handling necessary expenses such as food and fuel in the car. Every other expense goes on hold: clothing, travel, entertainment, and so on need to wait. You can — and should — still have fun, but now is the time to opt for free activities. (See also: 5 Budget Overhaul Tricks for the Recently Unemployed)

For the time being, pay for your expenses in cash. First, you'll stay more aware of what you're spending if you're handing over a stack of bills. Second, you won't be buying things you can't really afford if you're paying cash. You either have the cash, or you don't; no cash, you don't buy it. This is a very simple way to reduce your expenses to the essentials, only.

Remember that this is a temporary state of being. It's stressful to deal with income loss, and having to do without your favorite luxuries can make it even more difficult. However, reducing your expenses is key to getting your finances under control. Splurge on free experiences that help you relax and enjoy the moment, such as watching the sunset, taking a walk, meditating, listening to music, or volunteering.

Get money coming in

Now is the time to polish up all your side-hustle skills. You may not be able to get back to your original income level, but you can definitely pay some bills. There are numerous ideas for side gigs; you might start by offering your professional skills within your network. You can tutor, write, advise, consult, pick up a weekend job, do yardwork, become a virtual assistant, or any combination of those. (See also: 14 Best Side Jobs for Fast Cash)

Side work will help your mentality; it's important to keep working and be active rather than sink into helplessness. And more importantly, side work will bring in some money.

Don't panic

Last, but certainly not least: Don't panic. It's scary to watch your income plummet and your savings dwindle. But a sudden loss of income is not a reflection of your value as a person. It does not define you, and it does not limit your potential or your future. Many people have walked through the financial fire before and come out stronger than ever on the other side. By taking some of these smart steps now, you can start moving along that path yourself.

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This article is from Annie Mueller of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Save for Retirement When You Are Unemployed

Tim Lemke — Wed, 12 Jul 2017 09:00:14 +0000

When you're unemployed, saving for retirement may be the last thing on your mind. It may seem impossible to save for the future when you have no steady income to even pay basic bills.

But depending on your situation, it may still be possible to build your nest egg even if you're not working full-time. Here are some tools and suggestions for keeping an eye on the future during a period of joblessness.

Familiarize yourself with IRAs

Individual retirement accounts (IRAs) are great for people who don't have access to employer-sponsored retirement plans like 401(k) accounts. A traditional IRA is similar to a 401(k), in that any contributions are deducted from whatever taxable income you have. With a Roth IRA, on the other hand, earnings are taxed up front, but any gains you have won't be taxed when you withdraw money at retirement age.

IRAs are useful for people who are self-employed, or who earn money inconsistently through part-time or freelance work. So if you're not employed full-time but still have some earned income, these accounts can help you save.

Think of retirement savings as a necessary expense

When you're unemployed, it's important to get a handle on all of your expenses so that you know where you need to cut. You may find that there are a lot of costs (luxury purchases, eating out, cable TV) that can be taken out of your household budget, while other expenses (food, electricity, debt payments) are more necessary. If you think of retirement savings as a necessity, you will be forced to cut spending elsewhere.

Roll over your old 401(k)

If you've been laid off from a job, you will no longer be able to contribute to the 401(k) you may have had from your employer. But the account will still exist and the money is still yours. You can let the old 401(k) account sit, but it's better to roll it into a traditional individual retirement account (IRA). The IRA will give you more flexibility and investment options, and may also have lower fees. And you can begin contributing to it once you have any earned income at all.

Focus on rebalancing

You may not be able to add much to your retirement accounts, but you can work to make sure they are optimized. This means making sure you have the right mix of investments based on your retirement date, and getting the optimal blend of stocks in various industries and asset classes. It's always smart to examine your portfolio to ensure you are not over- or underinvested in any one area.

Look for higher bank interest rates

If you're not taking in much income for the time being, you need to have your cash savings working for you. That means any cash savings you have should generate as much income as possible. Interest rates are still quite low, but many online banks offer interest rates on CDs and savings accounts that are higher than average.

Avoid the temptation to cash out

It may be tempting to take money out of your retirement funds, but you should avoid it if at all possible. One of the best ways to see your retirement savings grow is to let your investments do their thing. You can see a meaningful increase in your retirement savings just from market gains, even if you're not contributing for the time being.

Withdrawing from retirement accounts, however, has consequences. First, any money you take out has no chance to grow and help you expand your overall retirement savings. Second, there are penalties and taxes associated with taking money out of retirement accounts early. (See also: 5 Questions to Ask Before You Borrow From Your Retirement Account)

Continue to focus on growth, if you can

If you are unemployed and have some investments in a taxable brokerage account, you may be tempted to shift them to dividend stocks or other income-producing investments. This can give you extra income at a time when you may need it. But making this kind of adjustment could have a long-term negative impact on the overall growth of your portfolio. If dividends, bonds, or other income-focused investments will help you keep the lights on, fine. But it's best to focus on finding other sources of income, or reduce your spending first before going this route.

Reinvest dividends, if you can

If you do have dividend stocks already, you can still contribute to your retirement portfolio by reinvesting any dividend income you get from stocks. You may be tempted to use that investment income to pay bills and help get through your unemployed period, but if you can get by without it, direct the dividends to buy more stocks and other investments instead. Even small contributions added to your retirement accounts can add up to considerable savings over time.

Get your spouse involved

Perhaps you never thought to include your spouse in retirement planning because you felt it wasn't necessary while you were working. Now his or her income can be directed to help you save. This may be a challenge, since they are now also working to help pay more of the bills. But there are some ways to use your spouse's income for your own retirement accounts. If you have a traditional or Roth IRA, your spouse's earned income can go toward your account. (Note: This is only allowed if you file your taxes jointly.)

Plan to pay into accounts later

If you are unemployed but expect to be working in short order, you can postpone contributions to your IRA and add money later, even if it's after the end of the year. In fact, you can contribute to an IRA all the way up until April 15 of the following year. So for example, let's say you planned to max out your IRA by making monthly payments. (This would be about $458 monthly for a total of $5,500 for the year — the maximum amount allowed by the IRS for people under 50.) But let's say you are out of work from August through October of that year. You can hold off on contributing during that time and make up the difference in later months, even the first few months of the following year, if necessary.

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 New Reasons You Need an Emergency Fund

Damian Davila — Thu, 29 Jun 2017 08:00:10 +0000

You need an emergency fund: You've probably been told this plenty of times before, and you maybe haven't taken it as seriously as you should have.

Well, some fresh data from 2017 proves that … yes, you really do need an emergency fund! If you've delayed stashing that money away, now is the time to start.

1. Potentially higher health care costs under AHCA

Let's start with a big-ticket item: health care. Under the current administration, the American Health Care Act (AHCA) is adjusting several items from its predecessor, the Affordable Care Act (ACA), otherwise known as Obamacare.

Depending on several factors, including your age, and income level, and where you live, you may end up paying more or less under the AHCA than you did under the ACA. Those who are older, have a lower income, and live in an area with higher premiums are likely to pay more under the AHCA. For example, while a 40-year-old resident of Cherry County, Nebraska making $50,000 per year would pay 21 percent more in health premiums under the AHCA, a 27-year-old resident of Tulare County, California would pay 26 percent less.

To get an idea of how much you would in pay under the AHCA, use this predictor tool from the Kaiser Family Foundation and get more information from your current health plan provider. Having an emergency fund would allow you to be ready to cover not only medical emergencies, but also the potential hike in those health care premiums.

2. Worrying about finances makes you less productive at work

According to recent data from the Employment Benefit Research Institute, three in 10 American workers claim they worry about personal finance at their workplace. Even worse, over 50 percent of those workers believe that time spent fretting about money is making them less productive for their employers.

If you belong to this group of workers, then you would regain peace of mind at work with an emergency fund. By knowing that you could cover your necessities for three to six months if you were to lose your job, you would be able to focus on performing better and increasing your chance of a raise.

3. Average credit card APR is on the rise

What do you do when you don't have money to cover surprise expenses, such as the water heater breaking or the car going on the fritz? Most people without an emergency fund turn to a credit card.

Well, here is some bad news: A CreditCards.com survey found that the average credit card APR had reached a record 15.89 percent as of June 14, 2017. If your credit score is less than perfect, you can expect to pay an interest rate even higher than that average.

Remember, the whole point of having an emergency fund is to lower your financial risk. By using a credit card as an emergency fund, you're only adding risk to your personal finances.

4. Opportunity only comes around so often

Many people think of an emergency fund as a "rainy day fund." However, others think of it as an "opportunity fund" — a way to never miss out on a great opportunity for want of cash. And while an emergency fund should never be thought of as play money, if you have enough saved, you can use some of that cash to fund a special opportunity that may not come again. (See also: Why "Opportunity" Funds Are the New Emergency Funds)

Here are some examples:

You have the chance to refinance your mortgage to a lower rate (and lower your monthly payment!), but you don't have any savings to cover the necessary $2,000 to $3,000 closing costs. Luckily, there's enough in your emergency fund to help you go through with the refi.
You've had a lifelong dream of taking a two-week trip around Europe, but the tour company that you like is a little out of your price range. They offer a limited-time discount, and you pull some money from your emergency fund to take that trip of a lifetime.
The refrigerator that you've had since college has been jacking up your electricity bill for years. You discover that you could slash your monthly bill by 40 percent and get an energy rebate from the state government if you were to buy a more energy-efficient model. You don't have the money upfront, and the rebate expires next month … but there's enough in your emergency fund.

The list goes on. An emergency fund is usually a building block to achieve financial security, but it could also allow you to gain financial freedom. Once you gain the discipline to save enough to cover your necessities in case of an emergency, you may be able to continue to save in case of a seizable opportunity — or even a lifelong dream.

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This article is from Damian Davila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

11 Secrets You Need to Tell Your Financial Adviser

Tim Lemke — Tue, 28 Mar 2017 10:01:05 +0000

So you've made an appointment to sit down with a financial adviser and formulate a plan for your future. Are you prepared to talk about your full money situation? In order to truly help you, your financial adviser needs to look at the big picture. That means there can be no major money secrets.

Financial advisers will often begin each session by asking a lot of questions that may seem personal. But they'd be negligent if they didn't. In fact, it's their fiduciary duty to learn as much about you as they can in order to advise you properly.

Here's a list of secrets you'll need to share with your financial planner if you want the best advice.

1. All of your debt

When you're being crushed under a mountain of debt, you may not want to talk about it. But a financial adviser is perhaps the best person to discuss it with. Your adviser can't craft a sound financial plan for you if they're unaware that a good chunk of your income is going to pay off debt. If you let them know about your full debt situation, however, they may be able to assist you in climbing out of the hole and onto the path toward financial freedom.

2. Any job loss

It's not always easy to admit you are out of work. But a financial adviser can't help you properly if you don't provide a full picture of your income situation. If you're out of work now, let your adviser know. If you were out of work for a long stretch in the past, let them know that as well. Financial advisers can also help you navigate what to do when your income has been cut, as well as advise you on what to do with old 401(k) accounts and pension money. (See also: If You're Lucky Enough to Receive a Pension, Here Are 6 Things You Need to Do)

3. Family members you support

Do you pay child support? Do you regularly send money to your brother up in Buffalo? Do you have an elderly parent living with you? Your financial adviser will want to know about any money you spend to support other people, even if it's only occasionally or informally. These are expenses that have an impact on your overall financial picture, and are not the kinds of costs that you can easily eliminate.

4. Sizable gifts

You're fortunate enough to be given $25,000 from your generous Uncle Steve, but you feel like it's really not something you want people to know about. After all, who might come knocking on your door now that you have this extra cash on hand? That's understandable, but it's important to tell your financial adviser, because they can offer advice on what to do with the new funds. An unexpected influx of cash, even if it's just a one-time gift, can have a ripple effect on your overall saving strategy.

5. Tax troubles

Have you been diligent about paying your taxes? If not, this is something you'll want to tell your adviser. This goes for late taxes, tax liens on properties, and past audits. The longer you wait to take care of tax problems, the more you may end up paying in penalties and fees. Your financial adviser can help you clean up your tax issues, and will be in a better position to help you plan your future.

6. The status of your marriage

If you're meeting with an adviser, it helps to let them know if you're about to get married, or if your marriage is about to end. Marriage and divorce have all kinds of financial implications on everything from income to taxes to planning for retirement.

7. Your vices

Gambling. Alcoholism. A shopping addiction. We all have our bad habits, but it's important to be aware of those vices that impact your finances. Are you at risk of incurring debt due to a major gambling binge? Is alcohol preventing you from landing steady work? Your financial adviser can't accurately assess your finances if they don't know the situation.

According to Doug Amis, a CFP with Cardinal Retirement Planning in Cary, NC, even casual marijuana use is something clients should disclose to planners, because many life insurance companies still test for it.

8. Anything that your kids need to know

Hans Scheil, CEO and owner of Cardinal Retirement Planning, says that his most challenging clients are those who have kept important information from family members. This secrecy can create difficulty in later years, when facing important estate decisions.

"What happens with people now is that they develop dementia, or some sort of chronic illness, and they end up needing care," Scheil said. "This is when all of the family scandals come out."

Scheil says it's important to anticipate what your children and grandchildren may need to know about your estate to avoid strife down the road.

9. Charitable giving

It may seem odd to think of this as something you'd hide, but financial advisers say they've met with clients who have quietly been giving to a cause that their spouse or other loved ones might not agree with. Your donations to charity may not seem like anyone's business, but they can impact your overall savings if you give a substantial amount. A financial adviser can also walk you through getting tax deductions for your charitable donations.

10. Your own lack of financial knowledge

Are you the type who doesn't know an IRA from an IPA? Are you mystified by mutual funds and baffled by bonds? It's OK, your financial adviser is not there to judge you and will likely be more annoyed by any attempt to bluff your way through a meeting. Financial advisers can help you understand the ins and outs of investing and estate planning, so it's useless to pretend to know more than you do.

11. All of your side hustles

When your financial adviser asks you about your income, they want to hear about everything. Not just your day job, but your side work giving piano lessons, your freelance writing, your pottery sales, and even your gambling winnings. You may be hiding this income because you don't want to pay taxes. But your adviser needs to know about this extra income, or else any financial plan they create will be flawed. Moreover, your financial adviser can often give you advice on how to turn a quiet side hustle into a legitimate, profitable business.

This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Ways to Handle a Forced Early Retirement

Dan Rafter — Tue, 07 Jun 2016 09:30:33 +0000

You had a plan: You would work until 67, contributing the maximum amount of each paycheck into your company's 401K plan. You would then enjoy a retirement of traveling the world and spending time with your grandchildren.

But then your company changed your plans. They let you go you at age 55 or 60. Finding a new job at this age isn't easy. According to an AARP study released in 2015, 45% of job hunters aged 55 or older were members of the long-term unemployed, those who were out of work for 27 weeks or longer. And when these older job seekers did find new jobs, they tended to earn less money. The same AARP survey found that almost 48% of people 55 or older were earning less on their new jobs than they did at their old ones.

Those are intimidating numbers. But they don't mean that a forced early exit from the workforce will dash your retirement dreams. Here are five steps that you can take after you've been laid off or fired to make your earlier-than-planned retirement a successful one.

1. Assess Your Financial Reality

It's easy to panic when you've lost a job. But your financial situation might not be as dire as you think. To find out, it's time to perform a quick financial assessment.

First, list your monthly expenses. These might be lower if you are no longer paying a mortgage each month. Then list the income you have coming into your household. Maybe your spouse's income means that you can still save enough money each month for a happy retirement. Maybe you'll need an extra income boost from somewhere to still hit those goals.

Depending on how close you are to your official retirement age, you might decide to start receiving your monthly Social Security payments. You'll get less each month if you haven't reached full retirement age, but if you can't hold off on the extra monthly income, receiving your benefits a few years early might be a sound move.

If you were laid off or fired, you probably qualify, too, for unemployment insurance. Make sure to take advantage of this. That extra monthly income could help you stay on track for your retirement goals.

2. Get Realistic About Your Retirement Goals

You might have to scale back your retirement goals should you be forced to exit the workplace earlier than planned. Maybe you planned to take a long trip every year. If you're forced out of work five years early, you might have to scale that back to just three big trips spread out over your entire retirement.

This doesn't mean that your retirement is ruined. But you might have to refocus. Maybe instead of joining that high-priced country club, you'll be taking your golf clubs to public courses throughout your city.

3. Make Sure You Have a Plan for Insurance

You'll need health insurance even after you lose your job. You might qualify for Medicare or Medicaid, though you might not qualify for these government programs depending on your age and income levels.

If you need insurance not offered through the government, you can search for a low-cost plan through the insurance exchange created under the Affordable Care Act.

Letting your health insurance lapse can be a costly mistake.

4. Find Part-Time Work to Fill in the Income Gaps

If you need some extra income each month, consider taking a part-time job. This work, even if it doesn't come with the benefits of a traditional full-time job, could provide you with the extra bit of cash that will keep your retirement dreams alive.

Depending on your field, you might find a part-time job as a consultant. But even if you can't, you can still find enjoyment, and some extra financial security, by taking on a position in a new field.

5. Meet With a Professional

Retirement planning is complicated when everything goes according to plan. When those plans are suddenly changed? It's even more of a challenge to make sure that you have enough dollars saved for your after-work years.

That's why it's important to meet with a financial adviser who can help you determine what financial steps you need to take now. Depending on your income and community, you might even qualify for free financial advice.

A financial planner can help you create a new budget and a new financial plan that fits with your new money reality.

Have you faced early retirement? What steps have you taken?

This article is from Dan Rafter of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

10 Signs Your Company Is Going Under

Paul Michael — Fri, 29 Apr 2016 09:30:30 +0000

If you have ever read Who Moved My Cheese? you'll know that there are warning signs everywhere about an impending job loss. But what about the company itself? Is it safe? Or is it in real trouble? If you're having a few doubts about the future of your company, look out for these 10 red flags. (See also: 11 Financial Moves to Make the Moment You Get Fired)

1. There's a Hiring Freeze

When a company is doing well, it will be actively looking to expand and add talented new people to the roster. When times are tough, the HR department will initiate a hiring freeze. This is never a good sign. It can be done in a few ways. If the company management does things in a transparent way, they'll be up front about it. You'll be told that there is a hiring freeze until things stabilize.

However, most of the time, you'll be given no warning. Positions that should have been filled will be left vacant. When an employee quits, one or two other people will take on their responsibilities. Take a look at the current openings at your company — they should be listed on an intranet, or publicly on job boards. If you don't see any positions out there, or there are positions that have been open for many months, or years, then your company is probably in the midst of a hiring freeze.

2. Closed Door Meetings Are Everywhere

You walk through the halls of the company and office doors are closed, or sometimes slammed in your face. You peek in to see people clearly upset with raised voices, red faces, and there's a lot of shrugging shoulders and hair pulling. Unless your company has a specific reason to keep a lot of secrets — perhaps there's a top secret new product in development — then this can only mean one thing: bad news. Management will not want rumors to start running rampant, and will tell the decision makers to keep everything under wraps. Not only that, but when you ask questions about it, you'll get vague replies. These closed door meetings are not only bad for morale, but a sure sign that there are conversations happening about the future of the company.

3. The Good Employees Start Leaving

Good is a relative term, but in your company you will have employees who are known to be excellent at their jobs. They are good for the business, they are passionate and driven, and they are working on the important projects. When these employees start leaving on their own accord, for jobs that may be seen as a lateral move (or even a downward move), you know something is wrong. The rock stars of any company have a good handle on things, and their gut (plus inside information) will tell them to escape while they can. If upper management starts quitting, that's an even bigger sign of trouble ahead.

4. Layoffs and Reorganizations Are Constant

A company doing well does not need to lay people off, or continually restructure. A company performing poorly will look to cut staffing costs, and shuffle the remaining employees around. It's a Hail Mary approach that rarely works. Layoffs may result in some of the better employees being let go due to salary, or internal politics. The increased pressure on the remaining staff to do more work will take its toll. Mistakes will be made. Problems will escalate. Before you know it, six months have passed and the company is in even worse shape. And then there will be more layoffs, and more reorganization. When this loop occurs, the doors will be closing imminently.

5. Playing It Safe Is Encouraged

Taking risks is part of the business — any business. After all, starting a company is a risk, and risks are often required in order to grow and succeed. When risk-taking is suddenly frowned upon, you know the company is on shaky ground. What was once considered a bold move will be rebranded as dangerous, or problematic. Your company will slide into patterns of doing only what worked in the past, despite market changes and demographics shifting. Instead of making decisions that will elevate the company, management will pull back, and "play it safe." Expansion disappears. Innovation crumbles. Everything that made your company a success will be relegated to the back benches, with "tried and tested" solutions taking the lead. When playing it safe is the mantra, it's a big sign of weakness.

6. Everyone Is Unhappy

The conversation in the kitchen is all about how much the culture sucks. At lunch, employees everywhere are complaining about the state of the company, and the future it probably doesn't have. Smiles are in short supply. Everyone is stressed out. The entire staff is walking around with the weight of the world on their shoulders. This is not the kind of culture you'd see at Pixar or Google. Energetic, enthusiastic employees are the sign of a thriving company; the opposite is true of companies that are on the ropes. When everyone is down, the company is going in that very same direction… and quickly.

7. There's No Money to Do Anything

Cash flow is extremely important to any company. It's the lifeblood of the business, and without it, it's hard to pay salaries, order products, and advertise. In the past, getting the money you needed to get the job done was no problem. Now, it's a struggle. Your requisition for new supplies is denied. Pay raises are eliminated. People are asked to take salary cuts, or even worse, work for free — furloughs are very real, and very scary. Bills are not being paid. Vendors call you angry about not receiving money they are owed. These are all classic signs of serious money troubles. They are usually followed by closing the doors, for good.

8. The Company Stock Is in Free Fall

If your company is on the stock market, you can track the share price. Every stock has its ups and downs, but if the only way is down, your company has issues. Now, this may be because of a recent press release, or a piece of news that directly impacts your industry. However, if your company is in good shape, it should be a small fluctuation. When the stock starts tanking, and continues on that downward trajectory, things are bad. What's even worse is when major shareholders, including management, start selling off a majority of their shares. If they want out, the end is near. Get out now while you can, and don't let what happened to Enron employees happen to you.

9. Benefits and Freebies Dry Up

Your company was once great at giving employees the benefits they deserved. Not just health care and vacation, but things like free sodas and snacks, parking reimbursements, college tuition, and matching 401K. When times are tough, the perks disappear. If you now have to pay for a lot of the things you used to get for free, your company is in financial trouble. What's worse is that these perks, or lack of them, impact employee morale. Being asked to do more for less is never going to result in a great workforce, which then results in poor performance.

10. You're Not Busy

Your days used to fly by. You were frantic at times, but always had a lot on your plate. Now, you find yourself staring out of the window, or sending emails to people asking for something to do. When it's just you, it could be a clear sign that your position is about to be eliminated. But when there are many people in the company twiddling their thumbs, things are looking bleak. No business can afford to pay a staff to do nothing. If you're not busy for a long period of time, it's time to move on.

What are some other signs that a company is in trouble? Share with us in the comments!

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This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

11 Financial Moves to Make the Moment You Get Fired

Tim Lemke — Tue, 08 Mar 2016 10:00:05 +0000

Just about everyone goes through a job loss at some point in their lives. Hopefully, any job loss you endure will only result in a short time out of work, and minimal financial hardship. But even if you expect your time between jobs to be short, there are a number of things you should do right away to ensure you can make it through a stretch of time with no income.

As someone who endured two layoffs in the past, I can tell you that these steps will help keep you afloat until you land a new position.

1. Determine if You Are Eligible for Severance and Vacation Pay

If you've been let go from a job, employers will often provide severance pay based on the length of time you worked there. You may also be paid for any unused vacation time. The company should explain your eligibility for these funds upon your termination, but if not, make a point to check with the human resources department. In some cases, you may have to engage an attorney to fight for what you believe you are owed.

Companies generally aren't required to offer severance at all, but there are instances when you may feel you are due money for uncompensated overtime or other reasons. Just keep in mind that benefits may vary depending on if you were fired for cause or laid off through no fault of your own.

2. Assess Your Emergency Fund

Now is the time when your savings will come in handy. If you've followed the advice of many personal finance experts, you have at least three months of expenses available in liquid savings. But now is the time to assess precisely how much you have and what your expenses actually are. With proper savings and cuts to your spending, you should hopefully be able to pay your bills until you get back to work.

3. Reduce Unnecessary Expenses

You may think you're living frugally, but now is the time to really strip life down to the bare essentials. Your expenses should really come down to your rent or mortgage, utilities, and a modest food budget. (Keep the Internet and cell phone services, as you may need them for your job search.) But that cable TV subscription? Kill it. Gym membership? Suspend it. Avoid going out to eat, or shopping at high-end grocers. And turn down the thermostat a couple of degrees. Every penny you save now is money that will help get you through to the next job.

4. Assess Your Health Insurance Situation

If you received health insurance through your employer, your benefits may no longer be accessible to you. It's likely that you are eligible for COBRA benefits, which provide discounted coverage between when your benefits run out and when new benefits kick in. After a job loss, you usually have 60 days to apply for COBRA benefits, and they last between 18 and 36 months, depending on your situation. At this time, it's also worth exploring insurance options available under the Affordable Care Act at HealthCare.gov.

5. Apply for Unemployment Benefits (But Don't Necessarily Claim Them Right Away)

If you've lost your job, there's a good chance you'll be eligible for compensation from unemployment insurance. In most states, unemployed people are entitled to up to 26 weeks of benefits that are a portion of their previous salary. Note that earnings from part-time or freelance work can be deducted from unemployment benefits. You don't necessarily have to claim unemployment benefits right away if you still have some money coming in, but it's still important to research options and get your name into the system immediately after a job loss.

6. Accept Outplacement Service if It Is Offered

You may feel like you can do a job search by yourself, but if your former employer is connecting you with assistance for free, take it. Outplacement professionals can help you update your resumé, assess your skills to see what jobs might be right for you, and even help you with interviews and salary negotiations.

7. Update Your Resumé and LinkedIn Profile

Hopefully, these are things you've kept more or less up-to-date anyway, but if you haven't looked at them in a while, give them some attention now. You don't have to necessarily reveal that you are between jobs, but it's important to have up-to-date information on your skills and accomplishments. Be sure to make several resumés based on the different types of jobs you may be pursuing. (See also: 30 Minutes to a LinkedIn Profile That Gets You Hired)

8. Collect All Your Retirement Account Information

If you've lost your job, you're no longer going to be able to contribute to your company's 401K, or other similar retirement plan. You don't necessarily have to do anything with the account right away, but eventually, you may want to roll your old 401K into another 401K or IRA.

In the immediate term, make sure you save the login and password information to the account, as well as any relevant paperwork. It will also be important to check your account balance to see how much of your matched contributions were "vested." If you leave a company after a short amount of time, it's possible that the company can reclaim some matching contributions.

9. Adjust Your Auto Insurance Premium

What you pay for auto insurance is often partially based on how much you drive. If you are no longer commuting to work, you may be able to reduce your premium slightly by arguing that you're driving less. Your rate is especially likely to go down if you're no longer driving and parking in a dense, urban area.

10. Take a Breather

It's okay to take some time off before doing any hardcore thinking about your next career move. While you don't waste a lot of time in getting back to work, it's important to make decisions with a clear head. Do you want to remain in the same field? Do you want to start your own business? Do you even need to go back to work full-time? There is a lot to think about, so take some time. This is as much a financial move as one for your mental health, because the last thing you want to do is rush into a job that you're not suited for and find yourself back in the unemployment line again.

11. Reallocate Some Investments for Income

If you have some investments in a non-retirement account, it's worth examining whether you can adjust them to produce some income. It's not necessarily a good idea to immediately sell a large quantity of stocks or mutual funds, especially if they are for long-term savings. You certainly don't want to do anything rash. But perhaps a portion of your portfolio could shift to bonds or dividend stocks that will help bring you some extra cash.

What other money moves should you make after getting fired? Share with us in the comments!

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Go From Two Incomes to One

Andrea Cannon — Tue, 12 Jan 2016 14:00:02 +0000

Are you planning on taking some time off from work to raise a family — or has your spouse recently lost their job? Living on one income can be challenging, but it doesn't have to spell financial disaster. Consider the following ways to reduce the stress of a household income transition.

1. Plan a Trial Run

If possible, try giving a one-income lifestyle a trial run for at least a couple of months before making any sudden changes to your household. Act like the second income doesn't exist. This will help you determine if a one-income lifestyle is attainable, prepare you for any challenges ahead, and help you build up your savings in the meantime before transitioning to one income.

2. Make a Budget

If you aren't sure of how much you'll need to meet your monthly expenses on one income, then use a stay-at-home calculator for an accurate estimate. Once you understand your monthly needs, work on creating a budget and sticking to it.

Your budget should factor for fixed expenses like rent, car payments, utilities, health and life insurance, credit cards and loan payments, cable and cell phone bills, taxes, and necessities like groceries. But you should also account for variable expenses, like eating out and entertainment, subscriptions, and other expenses that you can more easily limit.

You may need to get aggressive in cutting some of these expenses, like canceling your gym membership or visiting the salon less often. And make sure you aren't living beyond your means when it comes to your rent or mortgage and car payments.

3. Build Up a Savings Cushion

Building a savings cushion becomes doubly important now that your household will be subsisting on a single income. The average family should save a minimum of three to six months' worth of expenses — and ideally up to a year's worth, if possible. While you're at it, create a contingency plan to help manage any further changes in income, unexpected expenses, or other financial emergencies.

4. Pay Off Debt

One-income households are less able to handle debt, so try to reduce what you owe as much as possible before transitioning to once earnings stream. Eliminate credit card debt and pay down as much as possible early on, and by all means, try not to add any further debt to your plate so that you don't increase your monthly expenses.

5. Strive to Save More Every Month

A lower household income means it's even more important to do all you can to save money wherever possible. Some easy tips for cutting monthly expenses include:

Shop sales and use coupons, whenever and wherever possible.
Limit dining out. When you do dine out, look for deals from sites like Ebates and Restaurant.com, so you can save money at all your favorite restaurants.
Take advantage of free activities with your family. Plan free date nights and family outings together.
Host swaps with your friends and family. You can swap food, clothes, books, or toys. You can clear clutter out of your home and receive items that feel like new from your friends and family.
Take advantage of personal finance apps to stay on track and receive alerts when you risk going over budget.

Living on One Income — Even When You Don't Need To

The steps outlined above are wonderful for households downsizing their income, but they work just as well in a two-earner household. In fact, living on a single income and saving the other is an excellent way to strengthen your finances quickly. And if you do find yourself needing to live on one income, you'll be better prepared — financially and psychologically.

What are your tips for going down to one income? Please share your thoughts in the comments!

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This article is from Andrea Cannon of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Is Your Emergency Fund Costing You Money?

Emily Guy Birken — Fri, 03 Jul 2015 11:00:26 +0000

We all know that an emergency fund is an essential tool in personal money management. And even newbies to personal finance can probably tell you how big an emergency fund should be — large enough to cover about three to six months of expenses.

But what if that rule of thumb is incorrect? If you have an emergency fund that is larger than you need, it could be costing you.

Here is what you need to know about figuring out the emergency fund sweet spot for your budget, and why it matters so much.

1. What Constitutes an Emergency?

The typical advice for creating an emergency fund assumes that you would need this fund in case of job loss. That's why the recommendation is to have several months of living expenses set aside, and why Suze Orman in particular suggests that you need eight month's expenses, since an average period of unemployment lasts about 32 weeks.

But generally, people who access their emergency fund need the money for an unexpected one-time expense, such as a car repair or medical emergency. This is a far cry from the kind of ongoing emergency you would be facing after a job loss — and you have much more leeway to handle such a gradual emergency creatively.

That's why it's a smart strategy to create a Plan B budget that you could institute in case you lose your job. If you know ahead of time what specific budget items could be struck from your monthly expenses, a smaller emergency fund could handle unemployment much longer than the typical advice would have you believe.

In addition, having a Plan B budget gives you options when there is a small financial setback — such has having to take a pay cut, for instance — without you having to dip into the emergency fund.

It's also unlikely that a job loss emergency will mean you are completely without a paycheck for several months. You might be able to find temporary or freelance work or draw some unemployment benefits, while also seriously reducing some of your expenses.

2. Expecting the Unexpected

So you know that you don't need a large emergency fund in case of a job loss. What about those unexpected one-time expenses? It's not possible to know exactly when your refrigerator will give up the ghost, or when you will need expensive dental surgery.

Except that it is possible to plan ahead for most unexpected expenses. According to a 2007 survey by the Pew Research Center, 34% of people experienced unexpected expenses in the previous year. These were the kinds of unexpected costs they faced:

34% had medical expenses,
24% had car expenses,
20% had home and housing expenses,
9% had life event and child expenses, and
The remaining expenses were comprised of work, travel and vacation-related, pets, and taxes.

Each of these types of "unpredictable" expenses is actually fairly inevitable. No matter how healthy you are, it's likely that you will need some sort of medical care eventually. If you own a car or a home, you need to maintain it. Though you might not know when to expect a birth, a death, or a wedding, you do know that they will happen.

So instead of treating these sorts of situations as emergencies, it makes more sense to create a targeted budget category for any expense that might otherwise take you by surprise. For instance, you might create a car repair budget category into which you put aside $100 per month. Then when you have an "unexpected" repair, you will have money already set aside for that purpose.

3. The Cost of a Big Emergency Fund

Just because it's unlikely that you will need six months' worth of expenses set aside, and your unexpected emergencies can be mitigated with targeted budget categories, what's the harm in keeping a large emergency fund? It can feel good to have the security of a lot of cash on hand.

Unfortunately, there is a major cost for that sense of security: inflation.

The cost of inflation averages about 3% per year. Even the best high-yield savings accounts currently offer an annual interest rate of 1% or less. That means inflation is eating 2% of your emergency fund with every year that passes — and inflation, like interest, compounds. For instance, if you have $15,000 in a savings account with a 1% APR and 3% inflation, your money will only be worth $10,133.84 of today's dollars in twenty years. (If you would like to check my math, this is the inflation calculator I used.)

If you never experience a job loss and use targeted budgeting categories, it is very possible that you might not need to use your $15,000 savings account at any point during those twenty years. You could have done something much better with that money.

4. Emergency Fund Best Practices

It makes sense to always keep some money in a savings account so you can access the funds quickly, just in case. But above a certain emergency fund ceiling, a smart move is to invest extra cash that would otherwise collect dust in your emergency fund. In particular, parking that money in a low-fee mutual fund can help you grow your money, while still keeping the funds available in the event of that mythical job loss.

The question is, where should you place the ceiling for your savings account emergency fund?

It all depends on what amount of money on hand helps you sleep at night and how much you otherwise have invested. If you get twitchy without a fat savings account, and you have a good handle on your retirement and other investment accounts, there's nothing wrong with having a large emergency fund.

If on the other hand you still haven't set up your 401(k) at work (but are otherwise not in severe financial distress), then it makes more sense to keep your emergency fund ceiling relatively low while you work on building up your investments.

It's also important to note that contributions to your emergency fund should be a consistent line item in your monthly budget. Staying in the habit of always putting that money away will help you to replenish the fund after an emergency, and give you another monthly amount of investable money once you reach your emergency fund savings goal.

Too Much of a Good Thing

Saving too much is generally not the biggest problem among American workers. But those who do work to protect themselves financially might be taking their good habits a little too far when it comes to their emergency funds.

Maintaining the right size emergency fund may require a little more work on your part — from figuring out a Plan B budget to anticipating surprise expenses to figuring out how to make your money grow — but that extra work will more than pay off in your sense of financial security.

How big is your emergency fund?

This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: