Leaving a job

Benefits planning

If you know you are leaving your company, the first planning action to take is to contact your Human Resources department. Find out what happens to all your benefits. If you are going to another job with benefits, you may need to do very little.

Health Insurance

Health insurance planning pays off. When you leave employee coverage you may be eligible for national or state COBRA plans. National COBRA is available for employees who work for company's who offer health insurance and have twenty or more employees. California has CAL-COBRA plans for employees who work for companies with two to nineteen employees.

Many departing employees simply opt for COBRA coverage. By doing so, you may be paying a very expensive premium for something you don't use. If you do take COBRA, you have the option of dropping some overages and keeping others. You may save money by not paying for vision or dental insurance if you don't use these services much. Also, you can keep any member of the family on COBRA with health problems, and move everyone else to individual coverage. Depending on the state, you may be far better off getting individual coverage for the whole family. It pays to check out the options.

If you the one leaving your job and your spouse has health benefits with his or her company, consider becoming a dependant of that coverage. Now, more and more companies are not offering to pay the premium for dependant benefits, so becoming a health dependant may not be a good financial option. However, in many states, health conditions will exclude you from getting accepted on an individual policy. Paying the dependant premium may be the best option.

If you eligible for continued health coverage under COBRA, what will the premium be? Some companies offer a range of plans. You may be able to keep coverage and lower your premium by getting a less rich plan.

If you and your family are in good health, get a quote from a health insurance broker on an individual plan. In California, for example, individual coverage is less expensive because California law allows insurance companies to underwrite (accept or decline) applicants. Groups, (two or more employees) have guaranteed acceptance, so the group rates are higher than individual plans. Every state is different. Find out your insurance options where you live.

If you take COBRA, it will cover you for three years after you leave employment. When you have exhausted COBRA, or if you were never eligible for COBRA, you will become eligible for Guaranteed Issue Health Insurance (HIPPA). You can find out more about what's available in your state by contacting a health insurance broker or the consumer section of the state's insurance website.

Planning your health insurance well is worth the effort. This is an expensive part of your monthly nut. Careful planning leaves more money for everything else.

Life insurance

If you have group life insurance, you may be able to continue coverage. This is usually more expensive than purchasing an individual policy. Again, shopping pays off.

Group disability insurance

Group Disability Income Insurance almost certainly goes away, since disability insurance covers your earnings. Leaving your job means you no longer have earnings.

If you are a consultant, or change jobs frequently, pick a high earning period and purchase individual disability benefits. This protects your earning power and your family if something happens which prevents you from earning income. This individual policy, once in place, is yours, regardless of employment.

Unemployment benefits

If you are laid off, find out if you're eligible for unemployment benefits. Your Human Resources department will help you access benefits.

Planning cash flow

Many of us have been faced with the big challenge of leaving a job without knowing where our next paycheck is coming from. A lot can be gained by facing your cash flow situation sooner than later.

Look at your available cash and your resources for cash. This list below is organized in order of preferred use. Take into account your:

      severance pay,

      unemployment compensation,

      checking and savings accounts,

      cash reserve account

      home equity line, and

      credit card maximum credit line(s).

After you have reviewed your available cash flow resources, look at your expenses. You may not need to go buy ten pounds of rice and beans yet, but look and see if you can afford your current lifestyle for the period you realistically believe you might be between jobs. If you feel confident about your resources, great, no need to go on with this exercise.

If you are concerned about meeting all your expenses for long enough to get a job in the current economic or business environment, evaluate your expenses:

      Mortgage or rent: Could you pay less of your mortgage? Could you get a roommate? Could you move?

      Insurances: Could you get higher deductibles to lower premiums on your car, home or health insurance?

      Food: Can you eat out less? Buy bigger quantities and save money per serving? Shop at a less expensive store? Buy on sale?

      Cable, phone, cell phone: Are you using what you pay for? Can you choose to receive fewer channels, cut down on your phone minutes, and drop some phone options?

      Discretionary expenses: Can you minimize as much as you can here by doing less clothes shopping, finding inexpensive sources of entertainment, giving thoughtful but inexpensive gifts?

After you've done this sober evaluation, add up your monthly budget, divide it into your cash flow resources and tell yourself the truth about how many months you have before you are through your available resources. If you don't think you will be able to find a good job in the number of months you have, its time to consider other options like taking an interim job or moving.

Three years ago a lot of very qualified people found themselves out of work and without prospects when the dot-com bubble burst. Historically, economic times like this happen every so often. In our current fast-paced economic environment, we feel many of us will experience this sudden "between jobs" phenomenon. Planning for your unexpected between jobs time is more important than ever. Most of us will find ourselves here some day, if we haven't already.

Barbara Bachelder, CFP® for Wealth by Design, LLC