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6 steps for handling a job loss

Blame the plunge in oil prices for one of the few dark spots in the otherwise sunny January jobs report. Though the economy created 257,000 jobs last month, some 13,000 jobs were lost in the oil and transportation industries. And experts predict that far more will be lost over the coming months if oil and gas prices don't stage a quick recovery.

That leaves oil service workers -- once among the most sought-after employees -- in the unfamiliar position of either being suddenly out of work or threatened with a job loss, said Mike Smith, president of STA Wealth Management in Houston, Texas. Unfortunately, getting laid off in any industry vastly increases your chance of making costly errors that could mess up your financial life for decades.

"People make really bad decisions when they're distressed," said Smith. "What you don't want is to make rash decisions because of the emotion of this moment."

The solution? Have a step-by-step game plan, ideally long before you get let go. What should it be?

Step one: Apply for benefits. The natural inclination when getting a getting a pink slip is to go home and drown your sorrows, but the better response is to drive directly to the nearest unemployment office and apply for benefits.

These benefits will not make you whole. Indeed, for most people they'll will only take the edge off a job loss because the maximum payments typically range from $300 and $500 per week. That said, every dollar that you don't have to pull from savings gives you the wherewithal to withstand additional time without work. That's pivotal if you're unable to find a new job quickly.

Step two: Consider insurance options. If you had health insurance with your previous employer, you'll be offered so-called COBRA benefits, which allow you to stay in your existing health plan by paying your employer for the cost of your benefits. However, the employer does not need to subsidize your costs (as the company likely did when you were working), so your monthly cost for health insurance is likely to be high.

Out of your price range? If you have a working spouse with health coverage, your job loss is the sort of extraordinary event that would allow him or her to add you to the policy even though the open-enrollment period is likely closed. If your spouse's employer offers family coverage, this may be your best option. If neither of those choices appear viable, you also have the option of getting insurance through private carriers or through a state-run exchange.

Step three: Address your budget. If you've never figured out just how much you spend each month and where the money is going, now's the time. It's particularly important to know what you pay for necessities, such as rent/mortgage, food, insurance, utilities and transportation versus discretionary items, such as travel and entertainment. Cutting back those discretionary costs allows you to survive longer without jeopardizing your home or your retirement plan.

Step four: Evaluate your proximity to retirement. If you're laid off in your 40s, you usually have little choice but to find another job. But if you're in your mid-to-late 50s or older, you may want to consider whether you have the option of retiring.

To determine whether you can afford to retire, take a look at your budget and figure out how what the gap is between what you spend and what you could get from Social Security and company-paid pensions at retirement age.

Not much of a gap? Then you may want to see whether you have sufficient savings to simply tide you over until you can apply for those benefits. Be sure to err on the side of caution, leaving plenty of economic cushion to handle unexpected events, such as a costly illness. Smith suggests you seek the services of a financial adviser before you commit yourself to early retirement, so you can be certain that you've weighed all the potential risks.

Step five: Refresh your skills. If you intend to go back into the working world, you may be able to use your time off to boost your attractiveness to an employer by updating your skill set. Consider the job skills that are in the greatest demand in your industry and sign up for classes or training to hone them.

If you think the job prospects in your industry are likely to remain dim, this may also be a good time to research how your skills could translate into a new career. You may have always worked on oil rigs, for instance, but that could simply mean that you're mechanical and coordinated -- maybe even good under pressure. Your state's unemployment insurance department may be able to help by suggesting programs or providing additional weeks of insurance benefits while you retool for a new career.

Step six: Set goals. You have no control over market conditions or when companies choose to hire, but you do have control over your own schedule and how hard you work at getting a job. Set daily goals, just like you would at work. Those goals may involve researching employment options, updating skills or reaching out to a set number of prospects each day.

To borrow from an old saying: The harder you work, the luckier you get.

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