What is Going On?!? 
The government relies on statistics, not the human's behind the statistics to tell a story. In reality, millions of people are underemployed (working well below their normal salary levels and skills).  Ask the waiter at your favorite restaurant or the clerk at the retailer.  You may surprised to discover how many have MBA's, BA's and yes, even doctorates. I can think of three Ph.D.'s, one MBA and three other college graduates, all friends of mine currently in this situation. All with at least 10 years experience and brilliant track records.  They can't find the positions in the 75K to 150K salary range their experience demands. They've taken low paying positions, while they attempt to launch their own companies or fill the gaps with freelance. These people show up as "employed" in government reports.  In reality, they wish they were. TOP

The current rosy economic outlook is buoyed by the real estate market, low interest rates and debt, not jobs.  If you look behind the numbers, people are spending, but they're spending on credit, not income.  It's home-refi money from those lucky enough to own homes with equity. Most credit unions and banks are reporting double digit percentages in increased defaults on revolving credit plans. TOP

Like you, I see the economic reports, but I've found the advertising market (see left sidebar) to be a much better barometer of the country's economy.  Why?  Because advertising is the first expense companies cut and it is also the first they default on.  If you have to choose which bills to pay, you pay those that effect your ability to run the company, not those from which you've already received the benefit prior to paying.  Advertising is a realized benefit prior to payment. 

The Pink Slip Party
So what do you do?  You've just found out you've been invited to join the pink slip party and you have no idea what to do next. You may be of the majority of a Americans that lives paycheck to paycheck.  Many may carry high credit card debt and other loans averaging 18% or more.  So what happens when the salary you count on to pay your bills, suddenly ends?  Don't panic.  You need your wits about you.

You may have been expecting it and it may come from out of the blue but when it comes, it seems you are never really prepared for it.  You've lost your job.  If you are the sole bread winner in the family, this can have a devastating effect on your ability to live and your self-esteem. If you are fortunate enough to have a working spouse, this burden will be eased because, at least you will not lose your medical benefits and the ability to buy food.  In part one,  this article, we give you some frank tools and insight into surviving this crisis.  Hopefully, you will not need to use most of these.  In Part II,  we covers hints for finding jobs and reviews of the different methods and options.  Part III covers the psychological issues you'll encounter and how to keep your faith and make it through.  But before we get there, let's deal with the immediate problem.  What are you going to do right now about money?

Reality Check

If you were not an executive in the company, your chances of having a golden parachute are next to nil.  The company will offer you extended health care coverage called COBRA, but the cost of this is generally out of reach for most unemployed, around $250-$500 per month, depending on family size. Considering most states pay less than $1500 a month in unemployment, this is nearly impossible for most families to pay for.

Ask your employer when your coverage ends, specifically.   Some insurance policies end the day you leave while others go through the end of the month. You'll want to use the next week if your insurance is in force to get your annual physical, dental cleanings and eye exams before the insurance runs out. It could be a year or longer before you have insurance again, so do what you can.  You may also get paid for any unused vacation time.  If you are in sales, you can generally negotiate 2-4 weeks out on collected revenues. Finally, make sure you get in writing that your former employer will compensate you for any company expenses that have not been submitted and any promises they have made to you before leaving. TOP

6 Steps to Take
the Moment You Are Unemployed

Step 1: Call Your State's Unemployment Office

Don't feel guilty about this.  You and your employer have been paying into this fund your entire working life.  You've earned the money you are going to receive through your own hard work.  This is the very first thing you want to do the second you are terminated. Call your state's unemployment office.  Most states begin the benefit period from the day you call, not the day you were let go.  You will not get paid for the first week of unemployment in most states (although in some they count the day you call as the 1st week--let go Friday, call, become eligible the following Monday. ) It will take 3-4 weeks to get your first check, longer if you were fired because they must do an investigation. In most cases you will still receive compensation even if you were fired.   The exceptions are termination for misconduct (lying, cheating, abusive language etc...) or criminal acts.

Emergency Extensions
Thanks to President Bush, unemployment benefits have been extended up to an additional 26 weeks.  Each state has its own rules.  California finally put this into effect in April and  requires that you call to receive an extension.  We tested this in May and it took us 3 weeks just  to get through! The telephone lines to the EDD will not allow you to hold. You must wait for your current benefits to expire and this mandate puts unemployed people in a precarious situation.   A better strategy would be to plan on spending a day in line at your nearest office.  Most unemployed people can't afford 3-5 weeks without any cash flow, especially after 6-months without a normal income.

The extension is good news for people qualified for positions earning over $60,000 per year. These better paying jobs are taking 8-10 months to land them.  Many positions are available in the lower wage positions ($14,000-$24,000 per year). This pay scale will force most professionals into bankruptcy quicker than unemployment. the extension will enable many to focus on  interviewing, networking and prospecting. 

Updated 10/11/2002: WARNING: The Federal Government has been withdrawing the Federal Extensions and the states have not informing the recipients of this.  Five people I know (on the first 11 week extension who were told up to an additional 11 weeks would be available if still unemployed) have been left high and dry without the second 13-week extension.  The checks just stopped.  DO NOT count on the extension.  If it looks like your benefits are going to run out within 6 weeks, this is your only source of revenue and you do not have a solid job offer, make arrangements to move in with relatives before it's too late.  TOP

Step 2: Plan for the Best but be
Prepared for the Worst

Make list of your liquid assets including stocks, bonds, 401K, IRA's, credit lines, savings, and pawnable items like CD's, VHS or DVD movies, electronics, jewelry and other items of value.   Depending on your savings situation and monthly expenses, you may need to liquidate these to survive.  If it appears you may need to access these assets, move any high risk stocks into to lower risk stocks or cash them out and put them in a savings account for this period.  The last thing you need to happen now is watch your saving drop 98% with stock market (as many tech workers have seen). You can always switch the funds back once you are working again.

You will have the option of rolling over your 401K or cashing it out.  Most financial advisors will tell you to roll it over.  If you have to make a choice between being homeless without food or rolling over your 401K, use it to survive.  If it is not essential to your ability to survive, roll it over.   Cashing out a portion or all of your retirement is a last resort and should only be used if you do not have any other choice. TOP

Step 3: Make an Honest List
of your Current Liabilities and Payments. 

What can you cut?  What cannot be avoided.  If you have to miss payments, choose bills that will not directly effect your ability to survive like department store credit cards, health clubs and membership dues.  To find a job you need a phone, electricity and roof.  Your Internet connection is also critical.  Car insurance is very unforgiving and you need a way to get to your interviews.

In a crisis situation, most credit card companies and automotive lenders will allow you to skip a payment or two, if you ask.  You generally will still have to pay the interest and any late charges on the account so this may or may not help you.  Utilities are less forgiving.  In most cases your cable will be shut off at 20-days past due.   Phone companies and the electric company can go as far as 45-days past due before you lose service.  Car Insurance will cancel within 10-days of being past due.   If you are a renter and can't pay your rent, it generally takes 60-days for the manager to legally have you removed from the premises although they will give you a 72-hour eviction notice if you are more than 3 days late. 

Step 4: Prepay As Much as Possible

Since you've just lost your job, you've got the most money you'll have until you receive your first new paycheck.    Pay as many critical bills as far in advance as possible like Insurance, phone and electricity.  You'll be glad you did this when the other bills start rolling in.  Stock up on essentials like toilet paper, shampoo, frozen and canned foods and pet food.

Step 5: Moving into Survival Mode

The average person is currently taking 4 months to find a new job.  Plan on taking six months.  This means you are going to need to adjust your lifestyle and move into survival mode.  The first place to save is unneeded luxuries like maid service, gardeners, and even add-on convenience services like caller ID, call waiting, premium cable channels and pagers.  The second best way to save money is on your food budget.  TOP

Step 6: Health

Most insurance companies will not allow you to do more than one month's worth of prescriptions at a time.  Sometimes your doctor can request multiple months if you are to be out of the country for an extended stay.  If you depend upon medicine for your health, get as many months as possible before your prescription card expires.  That $10 a month prescription could turn into a $120 a month requirement you can't afford right now. NEXT PAGE

See Financial Q&A:
What do you do when you can't pay your rent?