What to Do When You Lose Your Job, Part 1: Getting Back on Track

With two young adult sons and two failed marriages, Adam Stone couldn’t endure his job one more day.

He logged onto his computer and ran into a technical difficulty that triggered his frustration. He tried his normal coping mechanisms, but there was nothing strong enough to keep him from logging off his computer, walking over to his supervisor’s office — coat in hand — to say, “I’m leaving, and I’m not coming back.”

All his life, he’d played it safe and done what he considered to be the responsible thing. At 45 years old, he had put in almost 20 years of service, and he couldn’t take it one more day.

Since the birth of his first son, Stone had worked his good government job, saved money, paid bills, invested, and even gifted money to his less fortunate family members.

After breaking the news of his job loss to his live-in girlfriend, Stone went to his home office to calculate his finances. He checked his retirement savings plan, which he was now going to have to put on hold.

He discovered that he had $150,000 in his thrift savings plan (TSP), in addition to $22,000 in his savings accounts. His sons were going to college tuition-free, and he received $800 a month as a wounded veteran. Plus, he was still in the Army Reserves, so he would receive money from that source, too. These things helped him feel more secure with his decision.

He found ways to cut costs after his job loss, lowering his $2,500 of monthly expenses. Now he only needed an additional $900 to maintain his lifestyle. This could come from either his savings or the side business he had been preparing to start.

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How to Deal With a Job Loss: 7 Emotional Stages

This job hiatus went on for 10 months. Stone gained clarity about his life and a new perspective on what he wanted to teach his sons. If you define yourself based on titles and income, you’re destined to be unhappy because you can’t control it and it isn’t really what makes you happy.

Stone was relieved that he finally got the courage to quit, but he later went through stages of loss.

Each person who loses a job flows through several stages:

1. Denial: At first it’s as if the person is on vacation rather than unemployed. He or she often puts off taking care of necessities like applying for unemployment benefits.
2. Disbelief: Disbelief is similar to denial, but instead of thinking it’s a vacation, an ex-employee feels hurt by the actions of the company.
3. Anger: The hurt then shifts to anger, and the person may even curse the company and talk about how much he hated the place.
4. Self-Criticism: Anger is followed by self-criticism, in which the person feels disappointed in himself and his behavior, even when he’s done his best.
5. Withdrawal: After losing your job, this stage comes with a little shame and discomfort for not having a title or being able to explain when someone asks what he does for a living.
6. Reflection: This stage is when the ex-employee begins to contemplate what really happened and what he wants to happen next.
7. Acceptance: Acceptance is when he resolves to accept what happened and is ready to move on. Some people take a long time to get to this stage. They may toggle between anger, self-criticism, and withdrawal for a while.

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What to Do When You Lose Your Job: 5 Essential Steps

Stone made it through his hiatus because of his past planning. He set himself up to handle a job loss or catastrophic event by following five important steps that helped him maintain his balance.

1. Collect Your Benefits

Evangelia LeClaire – a career coach and founder of EvangeliaLeClaire.com – says that after being laid off, you should speak with the human resources department to understand your rights concerning COBRA. This is a law that gives some workers the ability to continue health insurance coverage temporarily after losing their jobs.

Coverage rates and time frames vary depending on your plan, disability status, and number of dependents.

LeClaire also suggests that you review your employment contract and account for all unused vacation or paid-time-off days. Collecting all bonuses or money allocated through severance packages should be priority number one. If you’re not sure what to do with your retirement benefits, Steve Martin says that you can relax and breathe.

“Whether to rollover the 401(k) or other retirement [accounts] is obviously an important decision, but this won't necessarily need to be made right away,” Martin says.

“There are advantages and disadvantages of leaving the funds in a 401(k), so patience is important here,” Martin adds. “In any event, it is generally best not to tap into retirement plans, as these are great tax-advantaged vehicles to provide for retirement, of course.”

2. Find an Affordable Health Plan

While COBRA is the law, it’s also generally very expensive. Erin Swanson, an HR consultant with Ambitious Women, advises her clients to “Begin looking right away at the marketplace for an affordable health plan if COBRA is not the way to go for you. COBRA can be very expensive, but for some, it is an option.”

Begin comparing the costs and coverage of options available within healthcare exchanges right away.

3. Secure Supplemental Income Sources

According to the Department of Labor’s website, workers are eligible for unemployment benefits if they're laid off “through no fault of their own, and meet certain other eligibility requirements.” It doesn't mean you can't hold a temporary job, while you're searching for your next full-time step.

While working to revitalize your career, look for part-time or freelance work to supplement your lost income through sites like FlexJobs.

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4. Adjust Your Budget

The loss of income will require that you make changes to normal spending patterns. Cut back to essentials only and start to regulate your emotional spending. Even if you’ve received a lump sum payout, you want to live as lean as possible to stretch your dollars. This will give you the flexibility to avoid making hasty career decisions just to keep the lights on.

Make sure to pay the bills that report on your credit first and continue to make at least the minimum payments on your debt. This way you won't be ruining your credit, while you're trying to find a job.

Try to budget so that you don't need to worry about dipping into your retirement savings, but be aware that the situation may eventually call for it.

5. Plan Your Next Career Move

When you're, immediately start updating your LinkedIn profile to reflect your current level of expertise. Also be sure to update your resume and set up job search alerts across all major job boards.

Another trick is that, once you've procured a job and are secure again, make sure to prepare for the worst. Try to create multiple income streams and establish savings that can serve as an emergency fund. In the event you lose your job again, you'll be prepared and not have to worry as much about the future.

Additional reporting by Toni Husbands and Lukas Shayo.

This is the first of a two-part series. Read the second installment.