Cramer: Steps to Take Right After a Job Loss


The list reads like a “who’s’ who” of great American companies – if the list was written by Stephen King.
I’m talking about the list of companies that have announced layoffs in 2008 and 2009.
Citigroup (Stock Quote: C) has lopped off 59,000 employees; General Motors (Stock Quote: GM), 19,000, with a huge early retirement buyout in the making that will shed even more jobs. Hewlett-Packard (Stock Quote: HPQ) is laying off 24,500 employees, and Alcoa (Stock Quote: AA)  is shedding 15,000 more.  Starbucks (Stock Quote: SBUX), Dow Chemical (Stock Quote: DOW), Morgan Stanley (Stock Quote: MS), Chrysler, Bank of America (Stock Quote: BAC) , the National Football League!  – even NASA is issuing pink slips – 7,000 at last count.
That’s how bad it’s become. We can put a man on the moon, but if the man on the moon ever came down here, we couldn’t get him a job.
Hey, all we can do is make the best of a bad situation, and that’s especially true for those Americans who have lost their jobs in the economic collapse of 2008-2009.
For those folks, my heart goes out to you. As someone who's been fired from one job and had another vanish out from underneath him, I get it. In the first case I was able to go elsewhere, but in the second I just lived on my sister's floor until I got my act together: Not exemplary! But if you've just been hit with a pink slip, you can take some of the sting away, both over the short- and long-haul, by taking some key financial steps that I’ve outlined below.
Figure out your financial position – I’ve always been a big advocate of having the equivalent of six-month’s salary, or better yet, one-year’s salary, stashed away in an emergency fund. If you’ve managed that, you can exhale – studies show that people who lose their jobs usually find another one within six months. Sure, this economy is difficult, but companies will hire again. The extra cash will help you ride out that storm. For help in figuring out an emergency cash reserve, visit BankingMyWay.

No cash? Tap into your retirement account - If you don’t have a good chunk of money to live on, you still have options. Most financial gurus are against tapping into your 401(k) or IRA plan for emergencies. And in most cases, I agree. There is a 10% tax penalty imposed by the IRS for doing so, but that’s not such a high price to pay to gain access to some emergency cash if you don’t have enough on hand. As I’ve said on Mad Money time and time again, the fat years are over, I don't know if we're looking at seven lean ones, but I do know that saving for the long-term, basically laying out money to pay for your expenses in the distant future, only makes sense when you've already taken care of your expenses in the present and the more immediate future. I care about health, I care about feeding kids, and then I care about retirement.
Get your financial paperwork in order – Most firms allow for an exit interview for laid-off employees, primarily to make sure all the right paperwork is in place, and to help employees transition into unemployment with as much support, financial and otherwise, as possible. Use this interview to ask about the status of your key employee benefit documents; your health care plan, any insurance or retirement plans, even your employee contract. Also ask about getting unemployment benefits and see if you’re entitled to a severance package, unused sick day, vacation or holiday pay package. Make sure to ask about any retirement plan distributions (see above) and figure out whether you want to roll your retirement plan over into an IRA or adverse financial circumstances will require you to take a lump sum payout from your retirement plan. Then circle back and ask about health care again because it is the most crucial and you may have forgotten it by now.
Check your health care package – By law, your employer has to offer you health care coverage, under the U.S. government’s “COBRA” statute, for up to 18 months after you’ve left your job. But there’s a catch: your employer can stick you with the entire cost of your health care coverage – up to 102% of your health care plan’s premium. You have 60 days from your date of termination to take the COBRA option. In the meantime, consider your own individual or family health care plan, even if it’s a “bridge” to your next health care plan at a new job.  Be prepared to fill out a lengthy health care questionnaire – the healthier you are, the less of a premium you’ll pay. For more information on finding your own health care plan, visit Depending on your financial situation, you might even qualify for a free, or low-cost, government sponsored health care plan. The criteria for meeting Uncle Sam’s S-CHIP health care program have already become looser under the new regime in Washington. Check to see what your state is offering here. One other note: I’m devoting an entire future column on the topic of health care strategies when you’re unemployed. Watch for it soon on

If you are in a position to do so, negotiate – Some people get pink slips at the worst, and most suspicious, times. If you’ve been let go a few weeks shy of a year-end bonus, or just after you brought a big new client into the fold, you might have leverage. So negotiate a settlement package that gets you your fair share. Don’t be angry about it, and don’t make it personal. Just be business-like and state your case. The same goes for any negotiations on things like stock options, employee stock, severance packages, vacation time, or medical benefits. When a deal is reached, make sure to get it in writing. A good tip: re-read your company employee manual – every word. Check especially to see what your company’s severance package policy is. Hold them to it when you begin to deal.
It’s also a great idea to revisit your household budget and restructure it in light of your reduced financial income. Cut expenses where you can, especially in non-necessary areas like satellite TV packages, or housekeeping or landscaping services. Also, contact your creditors and let them know your situation. Things like student loans and credit card bills can be postponed, or interest rates lowered, if you talk directly to your lender. The only way you’ll find out is if you try.
Losing your job isn’t the end of the world. But not taking the needed steps to cushion the financial blow can make it seem like it is.
—Brian O’Connell contributed to this article

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