Money Management for Young Adults: Financial Planning After a Layoff

If you are a young adult who has just landed a job after a long layoff, you deserve a pat on the back for the persistence that helped you successfully face the trials of unemployment and job hunting in today's tough economy. At the same time, now that you have a regular paycheck again, you should begin to think about repairing financial damage that resulted from being out of work and to prepare for the future financially. Here are 9 tips for financial planning after a layoff.

Review your financial situation. Did you use your savings, raid your retirement plans, run up credit card balances and cancel insurance coverage while you were between jobs? Take the time to review all aspects of your financial situation and to make a plan to address all problem areas.

Prioritize. Prioritize which financial brush fires need to be put out first. For example, overdue bills, personal loans and expensive debt may need to come before rebuilding savings or putting away more money for retirement.

Pay overdue bills. If you delayed paying some bills while unemployed, make paying them one of your financial priorities.

Start to repay personal loans. If you borrowed money from family or friends while you were laid off, call them with the good news that you have a new job and that you are going to begin to repay their generosity. If need be, set up a repayment plan. Even a small amount repaid each month likely will be much appreciated.

Begin paying down credit card bills. If you ran up credit card bills and/or made only minimum payments on them while unemployed, start paying them down more aggressively as soon as you can since this is very expensive debt.

Keep expenses under control. Being out of work probably forced you to eliminate unnecessary spending and to learn to live on a very tight budget. Don't give up your penny-pinching ways entirely now that you are back at work. Instead, continue to live somewhat frugally and direct as much of the income from your new job as you can to financial repair.

Start to rebuild your savings. You may have had to dip into or deplete your rainy-day fund while you were out of work, which makes sense, since you set this money aside for just this sort of financial emergency. Now is the time to begin to rebuild it since, as your recent experience may have taught you, two financial facts of life today are: you can't count on job security and having a financial safety net can make a job loss far more manageable.

Review your insurance coverage. If you had to cut back on insurance coverage while unemployed, review your current situation. Start with the insurance provided by your employer, since this coverage may be your least expensive option. If your employer doesn't provide insurance coverage, prioritize your insurance needs. Even if you are young and healthy, health insurance (catastrophic at least) is a must and should be at the top of the list. For young adults, liability insurance, which replaces a portion of your income if you can't work for an extended period due to illness or injury, also is important, as is home owner's or renter's insurance. Even if you were able to continue your insurance coverage while you were out of work, check your coverage levels to be sure that they are adequate.

Check out your retirement savings. Saving for retirement may have had to take a back seat while you were out of work, and you may even have had to raid your retirement funds. Once you have dealt with more immediate financial issues, look for ways to begin to build or rebuild your retirement funds. You might start by enrolling in your employer sponsored plan, especially if your employer offers a match.

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