When you rely on a regular paycheck to cushion you from lazy budgeting or unplanned splurges, an unexpected layoff hurts big time.
I knew I should have been using my paycheck to get ahead on debt repayment and put more money aside for the “what ifs,” but I still thought I had time before my career would come to a screeching halt.
One brief Zoom call killed my income completely and, as it turns out, your last paycheck and severance package is never quite as much as you expect — especially after taxes come into play.
If you are in the same layoff boat, don’t panic — even if, like me, you didn’t prep yourself financially.
Erika Taught Me
- Allow yourself time to grieve your job loss; you don’t need to find a new job the same week of your layoff.
- Trim your budget back to the bare bones to keep your financial stress manageable.
- Even when money problems feel impossible, avoid dipping into your 401(k) or taking on more debt.
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Layoff Recovery Timeline
A layoff is a big blow to your emotions and mental health, so don’t expect to have a new job and a bulletproof plan in place by the end of the week.
Instead, use these tips and timeline to help you stay on track while still allowing time to care for yourself.
| Your Main Goals | |
|---|---|
| Day 1 |
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| Week 1 |
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| Month 1 |
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| Months 2-5 |
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| Months 6+ |
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1. Get Squared Away With HR
Your head is already spinning at the news and now HR is dumping a bunch of paperwork and to-dos in your inbox.
Annoying? Very, but this is the essential stuff you need to tackle before you can tap out mentally for a few days.
You should expect the following:
- Last paycheck information and deposit date: Double-check that all owed vacation days, bonuses, and other compensation are included.
- Severance package: “You may or may not be able to negotiate for better terms, but be sure to understand any package you are offered,” says Jay Zigmont, PhD, CFP, founder of Childfree Wealth. “Many employers offer salary continuation and healthcare benefits for a few months.”
- Health insurance cut-off date: Know when your health insurance benefits will end and if it is worth the cost to continue benefits through COBRA, a federal law that allows you to keep the same health insurance coverage. Typically, you have 60 days to sign up for COBRA and can be covered for up to 36 months in some cases.
- Retirement account and stock information: You don’t have to make decisions about these accounts right away, but it is good to know what options you have. When in doubt, leave your 401(k) alone and save the HR’s contact info for when you get a new job.
You should also expect details about returning company property, like laptops, and be reminded of any non-compete clauses you signed.
Psst… not every state upholds non-compete clauses, even if you signed them, so do your research.
2. Apply for Unemployment Insurance
There’s government assistance for people who lose their job through no fault of their own, so you won’t totally be left with no income at all.
While the program falls under federal law, each state has its own rules for how to apply — check your state’s requirements so you know exactly what to do.
You’ll likely need to provide information such as your previous employer’s business name, your supervisor’s name, the dates you worked, and the reason you were let go.
It can take a few weeks for the payments to start coming in, and the amount you’re approved for will depend on your earning history.
The amounts also vary wildly by state. For example, you could get as much as $809 per week in Colorado, $612 per week in Kansas, or $450 per week in California.
3. Put Your Budget in Survival Mode
You need to take a machete to your spending, but it’s not going to be this rough forever.
Repeat after me, “I need to choose to make uncomfortable cuts now so I am not forced to make hard sacrifices later.”
Here are the things I cut ASAP:
- All memberships and subscriptions: This includes my IPSY box, all video and music streaming services, gym membership, car wash, grocery/meal deliveries, and all of my children’s extracurricular activities (R.I.P my sanity).
- All services: Goodbye beautiful nails and brazilian sugar waxing.
- All eating out: I’m not saying you have to turn into Ina Garten, but you will have to prioritize a PB+J and coffee from home over poke bowls and fancy lattes. Don’t want to miss out on the social scene? Invite friends over for a potluck or charcuterie party.
- Unnecessary shopping: My rule is that if it is not keeping me alive, then I don’t need to buy it right now — even if it is the best sale the company has ever had. I unsubscribed from company emails and texts to curb the temptation.
These cuts alone helped me shave off $1,500 a month.
Additionally, I looked at every category that could be reduced or negotiated.
For example, I can cut my grocery spending without starving my family by meal planning around the store’s loss leaders — these are heavily discounted products (like Costco’s $4.99 chicken) that stores use to get you in the door in the hopes you’ll spend more. Just don’t fall for their plan — stick to the chicken.
You can also see if a temporary downgrade for your phone and internet is worthwhile.
READ MORE: How To Budget: 5 Simple Steps
4. Ease Back Into Networking
If you have your major bills covered and HR is off your back, then you can pause and enjoy this newfound freedom. No, this is not what you had planned, but sitting around stressed is also not the best solution.
Give yourself a little time to mourn and several days to just be. When you are ready, slowly emerge back into the world of networking.
Reach out to old coworkers for references or recommendations. Post the news to your LinkedIn or Facebook feed — not as a pity party but as a way to let the universe know you are open to new opportunities. You never know who can connect you to a new position or even a source of side income as you wait for the next right move.
Don’t throw your old company under the bus, no matter how much they deserve it. Also, avoid the desperation card:
❌ “Because Joe Blow Company is disorganized and horrible with their money, a lot of good employees were laid off today. If anyone needs a new engineer, I am available. Jo Blow’s mistakes will be your next best employee.”
❌ “I am in a panic after an unexpected layoff. I need work immediately and am an experienced social media manager. Please spam me with all of your advice and job posting ideas.”
✅ “Unfortunately I was laid off due to downsizing this week, but I am excited to see what new opportunities lie ahead. A few highlights I am especially proud of from my time with Joe Blow Company include…”
This is the time to start evaluating what you love and what you are good at and seeing which new job opportunities align with your career goals. Start customizing your resume to reflect your new skills and experience so you can act fast when there is a new opening.
READ MORE: How to Negotiate Salary According to Business and HR Pros
5. Don’t Jeopardize Your Future
Don’t let desperation lead you to foolish decisions you will regret later on.
It is tempting to use a credit card or cash in your 401(k) to give your budget breathing room, but these two decisions will ultimately come back to bite you.
“Debt is stealing from your future, and when you are in between jobs you don't know what the future holds,” says Zigmont. “Avoid cashing out retirement plans as you will not only pay taxes on it, but will also pay a 10% penalty if you are younger than 59½.”
FAQs
How can I manage my finances during unemployment?
You will need to set a bare-bones budget and research unemployment benefits and financial assistance programs.
“If you are in debt and have no emergency fund, then it is time to look for immediate gig work to make ends meet,” Zigmont recommends.
You might need to reach out to creditors and landlords to ask for extensions.
How can I stay motivated during a new job search?
There’s no sugarcoating it; looking for a new job will feel overwhelming.
The best thing to do is to set aside 30 to 60 minutes a day to look at job postings, work on your resume, and apply for new openings.
Then use the rest of your day to focus on your well-being: connect with friends and family, go for a walk, or enjoy time doing a hobby.
TL;DR: What To Do When You’re Laid Off
Losing your job can be scary and stressful, but know that you will be okay.
You’ll need to get your finances secured: sort out your severance with HR, apply for unemployment insurance, and track your healthcare coverage.
Then, it’s time for strict budgeting while you start networking and job hunting. You may even want to pick up a side gig to help you out while you look for more permanent work.
Just be smart and don’t panic. Give yourself the space and grace to move on from your old job and find something new.
For more money management and career tips, check out these episodes of the Erika Taught Me podcast:
- How To Budget For Beginners
- 6 Ways To Succeed In Your Career and Get Paid More
- 10 Steps Towards Financial Wholeness
Learn With Erika
- Free 5 Day Investing Challenge
- Learn how to get started as a beginner investor and make your first $10,000
- Free 5 Day Savings Challenge
- Discover how you can save $1,000 without penny pinching or making major life sacrifices
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