Maybe you saw it coming – or maybe you didn’t. Either way you no longer have a paycheck coming in and the bills are starting to pile up. There are some things that will help you get over the shock of losing your job and develop a sound financial strategy that will make you wiser and better off when you land your next job. This article will put an end to the financial fears that are keeping you up at night. Let’s explore some of the main questions you are probably curious about:

What must I do right away?

At first you may feel nervous and scared about loosing or switching jobs, but in the end it can be a very positive, exciting experience! This is a great time to reevaluate your career goals and see if they are in line with your personal goals. Take this time to think about your skill set, gifts and talents. Ask yourself what you want out of the future. Do you want to look for another job in the field you were in? What is your dream occupation? Have you always wanted to open your own business? Where do your passions and interests lie? Where do you want to be in 2 years, 5 years and 20 years?

This time is also the perfect time to look at your financial snapshot, where you are financially at this moment in time. Starting a business or a career change is the ideal time to figure out where you are today and where you want to be down the road. Your financial situation will play a big role in deciding what your next step is.

Do I qualify for unemployment insurance?

Unemployment insurance provides help for those who have lost their jobs through no fault of their own. If you quit, you are not eligible for unemployment insurance benefits. Eligibility requirements for unemployment insurance are determined at the state level, in order to find out if you are eligible you should contact the State Unemployment Office for your state.

How much should I cut my budget?

Given that the income stream you count on has changed, it is important to make a solid budget you can live on. Follow these easy steps to calculate your ideal budget:

1. Track your spending for one month. Record what you pay right down to the newspaper, bagel and latte you grab on your way to an interview or business meeting.

2. Evaluate the results and pinpoint where you are spending your money.

3. Cut out expenses that are unnecessary.

4. Record what you think your expenses should be next month and stick to it.

5. Ask yourself:

• Could I, for a short period of time, find a way to spend less money on that expense?
• Could I do that activity less often?
• Could I do that activity at a less expensive location?
• Could I find a way to gain the same benefit but spend less money?

Where can I find extra money?

Job-seeking or starting your own business is where your focus needs to be, so your supplemental income should come from activities that require very little creativity and as little energy as possible.

Here are some ideas for ways to find extra money:

Part-time work could be a good option, just make sure to take some things into consideration: flexibility to return calls and network.

Investments can also help you supplement your income; look for ways to readjust your investment portfolio that will provide you the most security while minimizing tax liability! You can reposition your assets to a mutual fund that pays income, take dividends from mutual funds in cash, rent out your vacation home, second bedroom, etc.

Retirement Funds are also sources of income that could be used for extra money; beware of that fact that there can be huge disadvantages to this. If you use retirement funds as cash, this can cause stiff penalties. Generally distributions taken from a qualified plan, 403(b), 401(k) or IRA before the owner reaches age 59 ½ are subject to a 10% early distribution penalty.

How can I avoid overwhelming debt?

Try to stick to your budget during times of unemployment or starting a business. Be creative with ways to cut spending, evaluate what are necessary expenses in your life and what you can do without. Is having a gym membership and cable television worth going into debt over?

If you are thinking about starting your own business do research to find out how successful your business could be in your area. Talk to people who are already in the industry and investigate the demand for your product or services among your target audience. Starting your own business can be expensive and before you take out large amounts of loans you need to make sure that you can develop a successful business.

Should I rollover my 401K to an IRA?

Any time you leave an employer you have several options of what to do with your 401k.

• Move it to a rollover IRA. This is the best decision for 99% of individuals. Moving your money to a rollover IRA allows you to invest your money a wide variety of investment vehicles. You would need to open a rollover IRA at a brokerage or mutual fund company.
• Keep your 401k where it is. If you are happy with the funds you have available to you and comfortable having your money held by your old employer then leaving your 401k with your old company could be the right option for you. If your 401k balance is less than $5,000 your employer can choose to kick you out of the plan.
• Move it to your new 401k. This option will allow you to have all of your 401k investments under one roof. However, you will be confined to the investment options offered at your new company. You must check with your new company to verify if they allow rollover contributions.
• Cash out. Cashing out of your 401k plan is like jumping out of a plane without a parachute, we consider this financial suicide. If you are under 59 ½ then you will have to a 10% penalty in addition to income taxes due on your distribution.

If you move your old 401k to your new company or roll it over to a rollover IRA the best way is to do a trustee-to-trustee transfer. Basically, the check from your old 401k will not be written out to you, it will be directly transferred to your new account.

How do I make taxes work for me?

You must pay estimated taxes on your income or you could be in for a nasty tax surprise. Certain job hunting expenditures are deductible, only if you are looking for job in your present occupation. You can deduct your travel, employment agency fees and resume expenses. These expenses are deductible even if you do not get the job.

There are many tax deductions you can get for having a home office. You can deduct 100% of the expenses that are directly related to the home-office space and a percentage of indirect expenses that relate to your entire residence. So starting a business from home can pay.

Make sure to take advantage of tax deductions for unreimbursed employee expenses. You can take deductions for publications and association dues, along with deductions up to 50% of the amount you spent on travel, meals and entertainment. You can also take deductions for education expenses to maintain or improve skills in your existing job.

Hopefully answering some of your biggest concerns has helped put to ease some of your financial worries so you can dedicate your time and effort towards your new business or career. By following our suggestions above, you won’t loose sleep over your finances and this transition will be a time of adventure and excitement.