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How to Recover After a Period of Unemployment

Maryalene LaPonsie

For 800,000 federal workers, the beginning of 2019 didn't start on a high note. With an ongoing partial government shutdown, these federal employees are either working without pay or waiting at home until a budget deal allows them to return to their jobs.

If previous government shutdowns are any indication, these employees should receive back pay once they can resume working. However, not all unemployed workers are that fortunate. While unemployment benefits are available for many people between jobs, a period without work can have long-term financial and emotional implications.

"Nothing is more discouraging than being laid off, so that can take a toll on someone's psyche," says Stuart Chamberlin, president and founder of advisory firm Chamberlin Financial in Boca Raton, Florida.

Here's how to recover after a period of unemployment:

-- Assess your financial situation.

-- Develop an action plan.

-- Contribute to your retirement plan.

-- Give 100 percent at work.

-- Keep networking.

[See: 10 Steps to Achieve Financial Freedom.]

Once you get back in the workplace, taking these five steps can help you climb out of debt, improve your finances and position yourself for a promotion. Read on for more information on each step to rebound quickly.

Assess Your Financial Situation

Those returning to work after a period of unemployment must first take stock of their finances. That means evaluating how much is left in savings, whether any debt was incurred and if a person's new income can cover all household expenses.

"Assess that debt and put it into some sort of priority," advises Dawn-Marie Joseph, owner of advisory firm Estate Planning & Preservation in Williamston, Michigan.

The priority for paying off debt and bills should be aligned with the payments that have the most impact on daily life. For instance, taxes, a mortgage and car payment may take precedence over credit cards or student loans. "If you lose your car, you can't go to a new job," Chamberlin says.

Develop an Action Plan

Once you've established the state of your finances, it is time to create an actionable plan. This should include rebuilding savings to cover six months of expenses, paying off debt and writing a budget that reflects the new level of income.

"People should always call their credit card companies and try to negotiate the interest rates," Joseph says. Late or missed payments could push credit cards to higher default interest rates, but companies may be willing to reduce those if extenuating circumstances are explained, particularly for customers who previously were never late on payments.

When creating a budget, workers may discover their new income cannot sustain their previous expenses. Though difficult, that may necessitate lifestyle changes, ranging from minor adjustments like your frequency of dining out to major modifications like downsizing your house.

[See: 10 Expenses Destroying Your Budget.]

Contribute to Your Retirement Plan

While workers may be tempted to eliminate contributions to their retirement plan in favor of paying off debt, doing so can be a costly mistake. Unemployed workers may dip into their 401(k) plans to keep their finances afloat, and delaying new contributions will only compound the long-term damage to a retirement fund's bottom line.

Many companies will match employee contributions to a retirement plan, up to a certain percentage. Joseph recommends people contribute at least enough to their workplace retirement plan to get that match.

Give 100 Percent at Work

A period of unemployment can wreak havoc on a person's self-esteem, but be careful not to carry emotional baggage into a new workplace. "When you start a new job, you want to be obsessed with excellence," Chamberlin says.

Developing a reputation for going the extra mile at work can provide a much-needed confidence boost and position you for a raise or promotion. Even if you plan on the current position being only temporary, having an exemplary record can help you receive a positive work reference.

Keep Networking

You may be willing to take a lower-paying job or a position outside of your normal industry in order to re-enter the workforce. In this situation, it's vital to continue networking to find a more appropriate job for the long-term.

Michael Goldberg, assistant professor in the Weatherhead School of Management at Case Western Reserve University, recommends keeping an updated LinkedIn profile and joining appropriate industry and alumni groups on the social media platform. "The most likely people to return a call (for job assistance) is someone you have an affinity through an alumni connection," he says.

In addition to social media networking, Goldberg says people should look for opportunities to connect with others personally over coffee or lunch. "A lot of people aren't super comfortable sticking themselves out there," he says, but these meetings are important for being at the top of someone's mind when they hear of a job opportunity.

[See: 10 Ways to Save More in 2019.]

While employment is essential for paying bills and saving for retirement, don't make the mistake of defining yourself solely by what you do for a living. Instead, shift your focus to personal attributes. "Instead of your net worth, what is your self-worth?" Joseph asks. Workers who understand they are more than their income or job title may be more resilient and better able to respond to the challenges that come after a period of unemployment.

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