No one ever wants to be in the position of facing a layoff! However, with changing economic tides, company restructures, and shifts in industries, it has now become a possibility that many of us are facing. The silver lining? With a proactive mindset and smart money strategies, you can weather this storm and come out stronger on the other side.
Here are some practical financial planning tips to guide you through the transition.
Build an Emergency Fund
If you are preparing for a layoff, the single most empowering thing you can do is start an emergency fund or bolster it in case you already have one. Ideally, you will want three to six months’ worth of essential expenses set aside. We are talking rent or mortgage, groceries, utilities, insurance, and minimum debt payments. Yes, this might sound like a lot, but even getting one month’s worth of layoff savings gives you enough breathing room during uncertain times.
If you are not there yet, no worries! Start small! You can automate transfers to a high-yield savings account and trim back wherever you can. Every dollar adds up and contributes to your financial security during a layoff.
2. Review Your Current Financial Situation
As soon as a layoff happens or if you sense there might be one in the near future, hit pause and take a look at where you stand financially.
Open up your accounts and take inventory:
- How much do you have in checking, savings, and investments?
- What are your monthly obligations?
- Are there subscriptions or discretionary expenses that can be paused or canceled?
This is your temporary survival budget. Focus on essentials and redirect any excess money toward your emergency fund. It is the heart of layoff financial planning so it is important to protect what you have while minimizing burn rate.
3. Review Severance and Unemployment Benefits
If your employer offers severance, get the full details!
What is the payout schedule? Will benefits continue for a period of time? Are there conditions tied to accepting it, like signing a non-compete?
Once such aspects are clear, apply for unemployment benefits straight away. Every state handles this a bit differently, so it may help to check your state’s Department of Labor website for instructions. There is often a delay between application and first payment, and filing early ensures you have a financial bridge while you job hunt so do not wait to apply.
And while you are at it, factor in both severance and unemployment when you calculate your monthly cash flow. This will give you a realistic timeline for how long your financial security during a layoff can hold out.
4. Update Your Resume and Start Networking
It might feel like the last thing you want to do, but updating your resume early is highly important! Think of it as part of your financial planning for layoffs. This is because the faster you get back to earning, the more stable your situation becomes.
Consider reaching out to former colleagues, mentors, and friends. Let them know you are open to new opportunities. Networking can lead to faster re-employment than applying cold online. Also use LinkedIn-sharing your recent accomplishments or posting about your job search can help you land some valuable connections.
5. Consider Alternative Income Sources
Sometimes the next dream job does not arrive immediately- and that is okay. In the meantime, explore side hustles, gig work, consulting, freelancing, or even part-time roles that match your skill set.
Temporary income helps slow the drawdown from your savings and gives you purpose and structure during the day. Plus, side hustles can even turn into full-time income streams if you work on them. The important thing is to stay open to possibilities while staying grounded in your layoff financial planning goals.
6. Understand Your Healthcare Options
Losing a job may also result in losing health insurance, and it is something you do not want to overlook.
First, check if you are eligible for COBRA coverage through your former employer. It is expensive, but it is immediate.
If that is not feasible, look into ACA Marketplace plans. Losing your job qualifies you for a special enrollment period, and subsidies based on your reduced income might make it surprisingly affordable.
Alternatively, if you are married or under 26, you might be able to jump onto a spouse or parent’s plan too.
Understanding your health insurance options after a layoff is helpful not just for peace of mind, but to avoid costly gaps in coverage that can derail your finances further.
7. Work with a Financial Planner
Sometimes, even after you have run the numbers yourself, it may be helpful to get a second opinion. A fee-only financial planner can help you build a short- and long-term plan tailored to your situation. They can offer perspective, flag financial blind spots, and guide you through choices like whether to pause retirement contributions or tap into your investments.
When emotions are running high, a professional can bring clarity to your financial planning for layoffs. Consider it an investment in your future peace of mind.
8. Final Thoughts: Stay Flexible and Focused
A layoff can be highly disconcerting! But it is also a moment to regroup, rethink, and maybe move to something even better. Whether it is freelancing, shifting industries, or doubling down on networking, this transition can even help you grow.
Also remember that, preparing for a layoff does not mean you are pessimistic. It means you are strategic.
When you build up your layoff savings, and explore smart, intentional steps, you are setting yourself up for a more resilient financial future.
Layoffs can shake your world, but they do not have to break your finances. So stay focused, stay proactive, and trust that this is just one chapter of your life – not the whole story.
