Planning for Life’s Financial Curveballs

Life can be unpredictable. This card stack examines how to create an investment strategy for surviving all of life’s curveballs, including how to handle losing a job to becoming a caregiver to surviving the death of a spouse.

How to Plan Financially After Job Loss

No matter how or why you lost your job, getting laid off is challenging, especially financially. You may be overwhelmed with worries: How will I pay for rent, groceries, gas, and more? How will I pay down my credit card debt or student loans?

All of these concerns are valid and need to be addressed, especially since unemployment lasts an average of 22 weeks according to U.S. labor statistics. Here are a few steps to ensure your financial stability.

1. Apply for unemployment benefits

As soon as you lose your job, contact your state’s unemployment office. You can file for unemployment either in person, over the phone, and online. Since the process takes several weeks, doing this sooner than later is best, particularly during periods of mass unemployment, which can obviously cause delays in the system. During COVID-19, unemployment benefits have expanded, so make sure you read up on the updated guidelines before applying.

2. Evaluate your savings

Take a look at how much you’ve saved over the years, and assess how long it will last taking into account your rent, spending, and other expenses. You may have savings that will cover a few weeks or a few months, and this could make a big difference in how you move forward.

It’s important to try your best not to fall back on retirement savings like your 401(k) unless absolutely necessary. Taxes, penalties, and loss in savings that would have compounded over time will cost you much more in the long term than it will benefit you in the short term.

3. Reduce spending

It is wise to reduce your spending after job loss. Even if you have a healthy savings account, you should still cut back on expenses just in case your job search takes longer than expected, or you have an unexpected large expense (such as a medical bill or emergency repairs you need to make on your car or home).

Immediately assess your spending and see where you can reduce or eliminate expenses. Think about cutting out all or most non-essential expenses, such as gym memberships, subscription services, ride sharing, and more. Also think about how you can save on essential services, such as internet, electricity, car insurance, and more.

Although making these adjustments is not ideal and may seem extreme, remember that unemployment is temporary and you will be able to readjust once you find a new job.

4. Keep track of debt and notify creditors

You should notify anyone you owe money to (i.e. credit card companies, utility companies, student loans, etc.). Once notified, they are more willing to offer opportunities to reduce or even pause payments, making it easier for you to stay afloat temporarily.

5. Learn how to prioritize

The first place your money should be going to is paying rent, utilities, and groceries, which can all be reduced in some way.

Second, prioritize debt like mortgages or auto loans, as defaulting on those could cause a loss in assets such as your home or car.

Third, pay the minimum amount on your credit card to avoid damaging your credit score and building up fees.

Keep in mind that the more you communicate with your lenders, the better chance you have of keeping your fees and mandatory payments as low as possible.

6. Don’t forget health insurance

Your job may have offered health insurance and other benefits. These typically terminate at the end of the month, meaning you have some time to find new coverage.

This is important because you don’t want to be hit with a huge unexpected medical expense when living off your savings.

Because unemployment is a “qualifying event” there are several options outside of just annualized plans, such as enrolling in your parent’s or spouse's plan, getting a new healthcare insurer, or paying to continue on your former employer’s plan, known as COBRA Insurance.

Managing Money After Divorce

On average, 50% of marriages in the U.S. end in divorce. In many marriages, often one partner has taken control of household finances, leaving the other partner much less aware of their overall financial fitness. Therefore, understanding how to manage your finances in the event of a separation or divorce is critical to ensuring your financial well-being. To start, follow these few steps:

Evaluate your finances.

First, it’s crucial to understand where you stand financially. In marriage, most spouses will share assets and liabilities, such as joint bank accounts, investments, cars, and more.

During a divorce, these assets and liabilities will have to be split apart, leaving you with only a portion of what you once had.

Therefore, it’s essential to understand your debt as well as all of your assets, including real estate, stock holdings, retirement accounts, cash and more. Review everything you own, either individually or jointly, and make a list. Include its value, or the amount of debt (such as a mortgage or car payment), in order to ensure that you have as complete a picture of your financial status as possible.

Get help from a professional.

A financial advisor is a good idea to have during or after a divorce. Once you’ve done research on your own, the aid of a professional can be helpful in planning for your future by taking into account your short- and long-term goals and your new financial state.

Keep in mind that as part of a marriage, you may have had the same financial advisor as your spouse, which is why it may be helpful to find a new advisor for yourself after divorce.

Devise a budget plan.

Either on your own or with the help of your financial advisor, creating a budget can be a great first step when dealing with how to adjust spending, investing, and saving.

With changes in your assets, budgeting can be really helpful in guiding you towards new financial goals and keeping you financially stable, which is especially important if you weren’t the “money manager” in your marriage.

Also, if you have dependents such as children or elderly parents, making adjustments to your spending habits now may be necessary so that those who rely on you aren’t jeopardized later.

Take steps to get into a better financial position.

Divorce often leaves people with less financial security. Depending on your circumstances, this means you may need to take on a full or part time job, go back to school, establish new insurance policies, shift investments to lower risk alternatives, cut spending, etc. 

All in all, divorce is already an overwhelming process, so it’s important to take steps to gradually improve your financial well-being. With these resources and a positive attitude, you’ll be on your way to financial security (and freedom) in no time!

The Costs of Caring for Aging Parents

While it may not seem so at first, becoming a caregiver for an elderly parent or guardian may come with several unforeseen or hidden costs. Many believe that caring for a parent at home may save more money than choosing an elderly care facility, but that may not be the case.

Aside from the emotional and physical strain that can result from becoming a caregiver, other potential costs include:

• Reduced hours at work

For many, caregiving means taking time off from work, reducing personal income by a fraction or entirely. This can take a big toll on caregivers, especially when compounded with extra expenses, lower pension income, and diminished opportunity to build up retirement savings.

• Lower social security benefits

Taking any time off from work will ultimately reduce pension earning and Social Security benefits over time. On average, the loss of these benefits along with reduced income can amount to a loss of around $300,000 of lifetime income among caregivers, according to the Family Caregiver Alliance.

• Extra expenses

On top of lost income, caregivers can face extra expenses when caring for their family member(s). This can include medical bills, food, utilities, and more, all of which can rack up pretty quickly. U.S. caregivers spend an average of $7000 annually on expenses, and face even a greater financial burden if their parents are facing more serious and progressive medical conditions.

• Reduced retirement savings

All of the above comes with a future cost as well: reduced retirement funds for the caregiver. When you work less, make less income over time, or have to dip into savings, your retirement fund may be reduced significantly. For instance, when you reduce work, your 401(k) or IRA contributions are likely lower, leading to less employer matching and growth over time.

If you are a caregiver, you may want to take some time to plan out the optimal way to go about funding your loved one’s care. Consider following these recommendations:

• Research long-term care insurance policies, which may offer financial aid for some caregiving costs.
• Make sure your parent is enrolled in any beneficial government aid programs they are eligible for (i.e. Medicaid, Medicare, disability benefits, etc.).
• Budget for your own and your parent’s expenses, and try to cut costs where feasible.
• Try to avoid using your savings to cover caregiving expenses as much as possible.

Get help from other family members to make caregiving easier on your time, money and own emotional and physical health.