Losing a job is one of the most stressful things that can happen to a person.
On the Holmes and Rahe Stress Scale, which is a list of 43 stressful life events that can contribute to illness, nine are related to work or would force a loss of employment.
Two events are among the top 10. Dismissal from work comes in as the eighth most stressful event, just ahead of retirement which is 10th.
Changing a job is stressful enough, given that it often means getting to know a new physical environment, different people, new routines and potentially a changed financial reality.
But having loss of employment forced on us brings a whole different level of stress.
From the perspective of how we spend our time and the sense of self-worth that we take for granted because of that, loss of employment feels like a harsh rejection.
“The feelings it can generate include shame, fear and pain,” says Financial Mindfulness CEO and Founder, Andrew Fleming.
“Shame of feeling humiliation, fear of financial insecurity, the pain of losing the connection with other colleagues and generally being angry.”
But feelings can repair.
Losing your job can also produce an unwelcome combination of psychological and financial trauma.
Our finances may take a big hit, or even if we have received a redundancy payout, our financial reality will be altered.
Some level of financial stress – very often acute, sometimes chronic – will result.
We take a look at how to minimise the financial stress that can result from a loss of employment.
Identify and write down your supports
Losing a job will in many cases produce waves of shock that go on for weeks, months and even years.
Shock produces many responses in people – from being shut down to dissociation to anger to grief to new motivation, or the complete lack of motivation.
Sometimes loss of employment can produce all of those responses in one person, all in the same week.
Shock can and does produce unpredictable behaviour, sometimes out of character.
Here’s what you shouldn’t do when you lose your job:
- Drink alcohol or take drugs to cope;
- Unload your anger on the person who gave you the news;
- Unload on your old boss or colleagues;
- Unload on your loved ones; and
- Spend large amounts of money to cope, especially from a payout.
These are all major red flags. If this happened to you or a loved one we suggest getting extra help and support, most likely in the form of a counsellor.
In extreme cases, the police may need to be involved.
Losing a job can feel like a life crisis, but it doesn’t have to be that way.
In the grand scheme of your life, you will eventually look back on it as a bump in the road and a transition to your next phase.
To begin to get perspective, we suggest identifying your support people and support systems – and leaning into them.
Those supports can do nothing to help you if you don’t use them.
This is a time to accept we need support and identify what that support is. We suggest this is one of the first things to do – within the first two weeks of a job loss.
Some examples of good support people and support systems:
- A trusted friend in the same industry;
- A mentor, or former senior colleague;
- Government services;
- Financial counsellor/counselling service;
- Money behavioural coach;
- Financial advisor;
- Outplacement services;
- Job search specialist; and
- A therapist.
Government agency Services Australia has some guidance on what sorts of official help is available, from free help on investment and financial issues to government support, unpaid entitlements and social work assistance.
If urgent financial assistance is needed, there are options.
Take stock – emotionally and financially
The hurt from losing a job can feel so painful that it becomes distracting from reality.
But when the focus is financial, the reality is precisely where we need to be.
We need a clear snapshot of our immediate financial position, taking into account:
- any payout received;
- any payments/entitlements owning (are they correct?);
- tax implications;
- immediate bills and repayments owed; and
- as assessment of whether we are in a position to meet financial responsibilities for a three-month period.
Taking stock is also something that should be done quickly, within the first two weeks of a job loss.
Regarding the payout you received, it should be obvious, but you will need to keep this safe. Protect it as quickly as possible. Be accountable to loved ones for this action.
The above mentioned that a therapist may be one of the supports we need to identify. This could be short-term, but in many cases, it is absolutely essential if we are to process feelings of anger, rejection, grief and fear in a healthy way.
Here are some examples of what we can and should take stock of:
- Your honest emotional state;
- Your support people and support systems;
- Your immediate financial position;
- Your immediate responsibilities;
- Your likely financial position in three months’ time; and
- Look at what you do have i.e health (and how this could affect it), loved ones, other connections.
It’s important to properly assess your ability to make loan repayments at this time.
Banks and other financial institutions are obliged to make temporary arrangements with repayments for people who have lost their jobs, but you must contact them to trigger this.
If they refuse to acknowledge your situation and adjust repayments, contact the Australian Financial Complaints Authority.
If you’re having trouble paying your loan or mortgage, contact them to find out how they can help.
Once you have processed much of the above, you can move on to taking stock of your career position.
But unless you need to work again immediately for financial reasons, we’d suggest that this item can come after the initial two-week period.
When you are ready to begin thinking about your next role, your initial actions can include:
- A detailed assessment of your current skills and abilities;
- Identifying your skill gaps and what training you may need;
- Having a clear and realistic idea of what your next role could be;
- A detailed summary of your experience;
- Rewriting or at least updating your resume; and
- Creating an online career profile e.g. LinkedIn.
These are time-consuming actions that require clear thinking and research. It’s been said many times that moving on to your next key career move needs to be treated as a full-time job.
So, unless you are emotionally ready to do this full-time, you may want to begin working through these slowly and methodically or even ‘park’ these ideas until you are ready.
Managing financial stress from losing your job
Financial stress from losing your job is likely to be acute and even feel scary and overwhelming.
If financial worries persist, financial stress becomes chronic.
Financial stress as a specific type of stress is finally being acknowledged and a number of different methods are available to deal with it.
There are a variety of well-practiced stress reduction techniques which we can use to help address financial stress.
These include exercise, maintaining positive routines, and getting curious about the things that do reduce your general stress – for instance, short walks and/or short meditation sessions.
The Financial Mindfulness app is a proven, evidence-based tool for reducing personal financial stress that packages together some simple but extremely relevant tools: mindfulness, goal-setting, and financial literacy.
Its development has enabled us to tread new ground in the measurement of financial stress.
We have written recently in detail about a seven-stage process for managing financial stress. These stages are:
Make a plan to suit your situation
Your plan needs to suit the situation you and your family finds themselves in and that takes an honest and careful appraisal of your emotional state, financial responsibilities, financial position and job prospects.
Without doing this background work, your plan may not truly reflect your current realities.
A huge part of your plan going forward should be a three-month financial budget that is a meticulous outline of any possible income and your pared-back expenses.
Instinctively, we know that budgeting allows us to manage money wisely, avoid financial stress, and be in control.
Budgeting is a practice that is always helpful to our financial situation, but after losing your job a new budget is essential unless you are walking straight into a new, better-paid role.
If you don’t know how to budget, you can go through our detailed blog on the subject.
The steps to beginning a budget include:
- Properly determining your household income;
- Beginning to track all living expenses;
- Balancing your budget;
- Going back to review your expenses;
- Reviewing your income potential; and
- Re-balancing your budget again.
“It’s important to revisit your budget with a different mindset that takes into account where you are at,” Mr Fleming says.
“Nice-to-haves’ should be delayed, for example, don’t upgrade your TV just yet.”
The purpose of a budget is to ensure you have enough money to cover all living expenses creating a ‘financial bridge’ to the next paycheck or income stream.
You will gain an understanding of how many months you have to cover living costs.
If that bridge is weeks, you should get on the foot front and contact your creditors and inform them of your situation.
For example, the bank for your mortgage to negotiate a repayment holiday, landlord for rent and immediately register for unemployment benefits.
Setting up a budget won’t have the desired effects if you cannot maintain a budget. Again, you can read our blog on how to do this.
The steps to doing this include:
- Scheduling your budget practice;
- Making budgeting a ‘game’ that you win at;
- Review the value of your money and simplify your budgeting;
- Get smarter about your use of credit;
- Get real about planning;
- Experiment with ‘not spending’;
- Nominate a budget buddy and become accountable; and
- Become proactive – and stay positive.
As we’ve emphasised, loss of employment is one of life’s most stressful events that we cannot ‘sweep under the rug’ or pretend didn’t happen.
We will need to call on all our patience, resilience, skills, connections to get through it and focus on healthy habits.
So from what we’ve outlined, you can see a lot goes into a plan to overcome the loss of employment without negative impacts, including ongoing financial trauma. Some degree of financial stress is inevitable, but it doesn’t have to become chronic and affect the quality of life.
Overall, your new plan after losing your employment should take into account:
- Physical health;
- Mental health;
- Strategies to manage financial stress and stress in general;
- Job search;
- Training/retraining; and
A word on that last point – accountability.
Let’s remember that loss of employment can be such a shock that we can have all kinds of reactions, including losing motivation and even falling into despair.
An accountability partner will help us stay on track with our plan so we do not sink into avoidance, financial peril and unhelpful behaviours.
Good luck and go gentle on yourself at this difficult time.