The way people react to unemployment varies from angry and frustrated to sad and depressed.  A few people, however, are actually relived having suffered in unhappy job settings where they have been overworked and over-stressed by their employers who have been continuously reducing headcount.  For the vast majority of people who suffer the untimely loss of a job, however, there is the immediate response to take action and go on the offensive.  After all it is better to be proactive than reactive.  On the other hand, looking before you leap, even if your actions seem praiseworthy, can cost you valuable time and money.  Below are four common reactions to unemployment, which can prove to be very costly mistakes.

1. Suing Your Former Employer

Perhaps, nothing seems as fulfilling as filing a law suit against your former employer.  Wrongful dismissal suits comprise a large part of the dockets in civil court. Moreover, numbers of social scientists and plaintiff’s attorneys have argued convincingly that we are a nation of victims.  The former group is more than willing to testify in lawsuits brought by the latter group in behalf of their clients.  But is a lawsuit against a former employer the best use of your time and resources?

First, lawsuits are expensive.  The cost of hiring an attorney is not cheap.  If you don’t have the money to retain counsel, then a the attorney might take your lawsuit on contingency, which will, of course, mean less money for you if and when a final settlement is reached.  Contingency lawsuits and their subsequent settlements can mean larger paydays for your lawyer and a lot less for you. 

The biggest reason to avoid lawsuits is the time and psychic energy they require.  Instead of focusing forward on your job search, you will be spending your time looking in the rearview mirror.  Time and attention will be devoted to giving depositions, ruminating about the past wrongs against you, and rather than fully concentrating on the next steps ahead in your job search, you become fixated on getting your just rewards.

Finally, while there might be real reasons which justify undertaking a lawsuit, especially if age discrimination appears to be the basis for mass firings, but remember there will probably be a stigma held against you by future employers.  Prospective employers are likely to be wary of job candidates who have sought to exact a price against past employers. 

2. Hiring A High-Priced Career Coach

The recent recession, like no other before it, has spawned a cottage industry in those who are willing to help the unemployed for a fee, often a substantially large fee.  Coaching is, indeed, a very valuable service for those looking to gain reemployment.  However, there are ways to obtain such services at far less cost.  For example, many churches and synagogues offer help for those looking for work.  They run support groups and even employ – free of charge – congregants, who might work in fields related to human resources or the social services and can provide sound advice and counsel. 

Moreover, there are many communities which sponsor career resource centers which offer the same advantages: low cost support groups and individualized coaching and counseling.  These same community support resources do an excellent job of advising on writing resumes as well as preparing for job interviews with mock sessions and relevant role-plays.

3. Paying Too Much for a Degree or Special Credential

Feeling productive is very important for anyone who has spent a lifetime working hard and striving for goals.  In short, high achievers want to keep active and busy.  One of the first and most natural reactions to the loss of a job is to want to seek additional credentialing, whether by completing a college degree or earning an advanced degree, or enrolling a certification program to enhance your employability.  There is no shortage of on-line degree programs offering everything for special certifications to bachelor’s, master’s, and doctoral degrees.  They can be extremely expensive and often require student loans carrying high rates of interest.

Before opting to return to the classroom, consider the following things.  First, is there a market for the job skills you are seeking to add to your repertoire?  Ask around, demand hard data and statistics from the school awarding your degree or certification.  If you are able to land a job in your desired field, will it pay enough over the course of your remaining career to retire the student loans and interest you will need to enroll?

One of the best kept secrets in this country is the network of community colleges, which offers all kinds of specialty vocational training for a fraction of the cost of private schools, to include on-line programs.  Living within the district or boundaries of a community college qualifies you for a minimal tuition payment.  There are even continuing education programs offered in the evenings at many high schools in your district that provide specialized training on topics like computers and social networking as well as certain career-oriented courses.

4. Going into Business for Yourself or Buying a Business

After years of working for intolerable bosses or companies which change direction at the drop of a hat, the temptation to run your own business can very alluring.  Yet, if you’ve never run a business before, be careful.  Ask yourself, if you are willing to put in 80 hours a week, netting out less than the minimum wage when all is said and done?  Do you want the responsibility of supervising other people?  There are many costs to starting a new business even if you are running on a shoestring.  Before you leap into entrepreneurship talk with others who have businesses similar to the one you want to open.  What can you learn from them? 

Many people have taken their severance or lump sum payout, or the bulk of their 401K plan to invest in a business, and then lose everything that would have constituted their nest egg for retirement.  In today’s difficult economy you don’t want to be throwing good money after bad in a hopeless business venture.  Then there are those people who wish to work with family and friends in a new business venture.  Nothing can break up a good friendship or make a family get together more uncomfortable than bad blood over a business deal gone wrong.

In closing, the appeal of keeping active while unemployed is very admirable.  Sitting at home and feeling sorry for yourself helps no one – you or your family.  On the other hand, evaluating your alternatives in terms of the costs and benefits can save money and avoid leading to costly mistakes, which will drain the few precious financial resources you might have at this difficult time in your life.

Stephen A. Laser, PhD has over 30 years of experience as a business psychologist. He founded and manages a Chicago-based consulting firm specializing in advising clients on hiring employees and author of Out-of-Work and Over-40.  For more information, please visit www.laserassociates.net.