Recently reemployed? Great! Now’s the time to prep for next time…
Congratulations! If you’re one of the many rejoining the workforce after a period of unemployment, definitely take a moment to celebrate and appreciate what not so long ago we used to take for granted: a full-time job.
OK, but no rest for the weary… Now it’s time to get serious and take advantage of your newfound security to be better prepared in case it happens again. And with what appears to be a permanent shift away from the unspoken employer/employee contract of old, your safest bet is to assume that it — a period of un- or underemployment — can happen again at any time, and plan accordingly. Here’s what I’d recommend:
1. Reevaluate cash flow and income taxes, i.e. understand what your true new take-home is, so that you can make good choices about spending levels and how to allocate the new income. (The newly reemployed may feel like recent college grads or ex-cons, just freed up from a long period of austerity measures and eager for a little retail therapy, and wishful-think themselves into overspending. Certainly, a little splurge is probably in order, but be careful not to further derail things.)
2. Now that you’re employed and probably eligible again, look at refinancing your mortgage (rates are still low) – maybe consolidating some other debt — & at least secure a Home Equity Line of Credit (again, to open up your options should unemployment happen again.)
3. Check your credit report. If it’s not where it should be so that you qualify for the best rates on loans, begin taking steps to fix that. (Liz Pulliam Weston is the expert on how to do that.)
4. Be sure to evaluate employee benefits at the new job: 401k match? Health insurance better than spouse’s? Cafeteria plan? Employer Stock Purchase Plan? Life insurance benefit worth taking advantage of? Any other “free money”??
5. Even if you are earning so much that you’re sure to be ineligible for college financial aid for any kids going to school, fill out the college financial aid form (FAFSA). Otherwise, you’re out of luck for a financial aid reevaluation if your situation changes for the worse.
6. Once you have a grasp of cash flow, you’ll be in a position to decide how much to devote to a) paying down debt, b) rebuilding emergency reserves, c) restarting saving toward goals such as retirement. In general, don’t max out your 401k if either a) or b) is a trouble area. But do at least get any 401k match. Don’t prepay a mortgage with a lower interest rate if you’ve got credit card debt at 27% or an inadequate emergency fund (< 6 months living expenses).
7. Once you understand your income tax situation, you can decide how to set your withholding to avoid ending up with a big bill (& maybe penalties) or refund next April. If your new cash flow permits, you may want to play some catch-up for retirement by making a 2009 IRA (Roth or traditional) contribution before April, or having a self-employed spouse direct more to his/her SEP or Solo 401k. BUT not until you have a foundation (emergency fund, “bad” debt paid off, cash flow under control) firmly in place!
[...] you missed the boat on taking advantage of these tips for the newly reemployed the last time mass layoffs were in vogue and fear you may be a layoff candidate anew, now’s [...]