Written by Monica Sandler

Tuesday, 23 December 2008 03:00

According to the Bureau of Labor Statistics' report for July, both the number of unemployed Americans (14.5 million) and the unemployment rate (9.4%) changed little since June. July nonfarm payroll employment continued to decline by total of 247,000 jobs, the Bureau reports. The job-related effects of recession are definitely easing, but have likely not ended. So what should you do if you're let go?

1) Negotiate your severance - if you can. Although many large companies have a written severance policy that restricts negotiation, you may be able to convince your employer that you deserve additional severance money. If your company offers you a negotiable package, first determine how long you think you'll be out of work. Look closely at your industry. Is it growing (despite the economic times)? Are there many job classifications that you can fit into? Then look at the general job environment - is the economy in a declining or gaining phase? Obviously, the more you can get, the better; but be reasonable in your estimates. Offer facts and figures to back up your claims.

2) Use COBRA to extend health care insurance. The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows laid off employees to continue their health coverage offered by the employer for up to 18 months. Most plans allow you to elect COBRA coverage during enrollment periods. You must notify the plan administrator within 30 days of your discharge that you'd like to elect continued coverage. Some plans allow you to change to an individual policy. This can save you thousands over starting a new policy, and you generally are not held to the same qualification standards.

3) Claim unemployment benefits. Companies are required to contribute to unemployment insurance accounts to protect employees during job loss. Though some people feel embarrassed to apply for benefits, advisors like Nathan Threebes of Ameri-Financial recommend accessing these funds. "Not only do these funds help put food on your table, receiving benefits also helps preserve your savings," says Threebes. State law determines eligibility and coverage. Contact your state Unemployment Insurance Agency as soon as possible following your release.

4) Manage your debt. Look at your monthly debt payments and make sure you have an adequate emergency fund that covers those payments. In these tough times, allocating at least six months' worth of liquid assets is recommended to cover your jobless period. Most lenders offer debt coverage insurance ("protection plans") that will cover your payments for a defined period of time - but you must have elected this coverage prior to your job loss. In any case, avoid increasing your debt to cover your daily or monthly expenses. Only use credit cards AS A LAST RESORT.

5) Prioritize your expenses. If you haven't done so already, create a budget that includes all your monthly expenses. Sort your expenses into categories, such as housing expenses, transportation, entertainment (which should include your cable or satellite bill), food and insurance coverage. Prioritize each category so that the most important expenses will be paid first. If you have to live without 200 TV channels while you are unemployed, so be it. Without income, you are now in financial survival mode. Be prepared for an extended unemployment period.

6) Claim job search expenses. In most cases, the IRS will allow tax deductions for job search costs. Make sure you document each expense - and keep receipts!

7) If you have borrowed against a retirement savings account - like your 401K - you may be required to pay back the loaned amount in as little as 90 days from the time you lost your job. If you have the ability to repay the loan, pay it off as soon as possible.