Top 5 Financial Moves to Make When You’re Suddenly Laid Off

by Hank Coleman

When you’re suddenly laid off, one of your first concerns is probably how you’re going to financially survive the storm until you find another job. It’s a huge fear—starting over. But, there are things that you can do to lessen the blow and get back on your feet as soon as possible.

The following are some steps to take immediately after you’re laid off. These actions can help you cope with the temporary loss of income. The sooner you can get over the shock and start working on these action items, the sooner you can get back to your normal life.

Financial Moves When You're Laid Off

Apply for Unemployment

First things first: apply for unemployment benefits right away. Depending on which state you live in, the qualification criteria for unemployment may vary. But, you usually have to be completely unemployed or demoted to part-time status, in a position to look for more work, and have worked in the past 12-18 months in order to file for unemployment benefits.

If you have received a severance package, then your benefits likely won’t start until after your last paycheck. However, it’s important to apply for unemployment benefits sooner rather than later to get the application process started and out of the way. It will be one less thing you have to worry about after you leave your job. And in many states, you have many options when it comes to applying for unemployment benefits, whether it’s purely online, over the phone, or by mail.

The unemployment offices in your state will require extensive documentation to determine your eligibility. They will look at things like your employment history from the past 12-18 months including gross pay amounts, outside income, and other personal information. So, make sure you have everything ready before you apply to speed up the process.

It seems like this would be a no-brainer. But, you shouldn’t put it off. You paid taxes. Your former employer paid for the insurance. You might as well take advantage of every government program that you’re entitled to use.

Manage Your Own Health Insurance

If your employer previously covered your health insurance, then check with your HR department as soon as possible regarding your coverage status after your employment with the company ends. In some cases, there will be a grace period to give you more time to seek out alternative health care options.

During this time, you can either ask your spouse if their employer will cover you and your family, apply for Medicaid if your family has little or no other sources of income, or acquire insurance through your state’s Affordable Care Act platform.

Even if you lose your job outside of the open enrollment period, you could qualify for health insurance during a special enrollment period, which is designated for individuals and families who have a baby, adopt a kid, get married, lose a job, or move to another state.

Assess Your Financial Situation

Once you’ve filled out an application for unemployment and figured out your new health care situation, the next crucial step is figuring out how to navigate this temporary period of limited income.

Sit down for an hour or two and assess your financial situation. Consider these questions:

  • How much liquid cash do you have currently in checking and savings accounts in an emergency fund or in a savings account? You can also earn free money from opening a Chase Online checking account! Check out Chase.com checking for details.
  • What payments do you have coming up that can’t be covered potentially with a credit card?
  • What areas of your budget can you cut back on? Can you suspend gym membership, cut back on eating out, hold off on any big purchases, and cut other luxury items from your budget?
  • What are your current credit card balances? Can you make the minimum payment or more on them? Which credit card has the lowest interest rate? You may need to rely on this one to cover expenses if you don’t have the cash to cover everything, at least for a little while.
  • Is there a low interest rate credit card that you can consolidate your others onto just for the time being until you get back on your feet?

You may have to cut back on spending and carry a higher balance on your credit cards. But, remember that this is only temporary and doing regular budget check-ups will help you stay afloat.

Stop spending immediately after you are laid off. Reexamine your spending. There will be a time where you need to tighten your belt. Now is the time that you should reassess your family’s monthly budget.

Navigate Your Retirement Account Options

If you had a 401(k) through your employer, then deciding what to do about your retirement fund is another important task to tackle when you’re laid off. If you want to control your retirement fund, then you may want to consider either an early withdraw, which is subject to early withdrawal penalties if you’re younger than 55 or roll it over into an IRA account. Typically, it is best to move your 401(k) retirement account away from your employer’s plan into your new plan or a Traditional IRA that you can manage closely yourself.

An IRA account might be preferable if you’re no longer with the company because it’ll give you more control over your investments and your company may have unfavorable policies for former employees. Be sure to check with your HR department for more details on how 401(k) retirement plans are managed for former employees.

For example, you will most likely not be able to add to your plan once you have left your employer. If you are hesitant on your next move, you can always leave your account with your former employer for the time being. Look to move the 401k plan as soon as you land your next job.

Apply for Jobs

While you’re sorting through your finances and waiting for unemployment, looking for jobs is a productive way to spend your time. Whether you’re interested in landing a full-time, career-oriented job or a few freelance, part-time jobs right away, there’s nothing wrong with jumping on job boards and applying for jobs immediately. Do not forget to let all of your friends and family know that you are on the job hunt and on the market again. You never know where your next job opportunity will come from.

You might also want to reach out to folks on your LinkedIn network to see if their companies are hiring. The best way to get your foot in the door in a competitive job market is who you know, not what you know. So give it a shot! What do you have to lose?

Losing your job is not a great experience. But, careful planning can make an unexpected layoff feel more like a mere bump in the road instead of a life-changing loss. As long as you cover your bases with your HR department and reduce your expenses while living on a limited income, you can and will be able to find financial stability, even after a layoff.

Have you ever experienced an unexpected layoff? What did you do to get back on your feet quickly? What were some of the steps you took to tighten your belt and shore up your family’s budget?


Published or updated June 7, 2016.
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{ 6 comments… read them below or add one }

1 Sam

People should definitely file for unemployment ASAP. You paid for it through your company taxes all this time. I hope more people figure out how to get laid off on purpose to negotiate a severance package. The severance package will provide for a financial runway to do a lot more things in a stressfu people should definitely file for unemployment ASAP. You paid for it through your company taxes all this time. I hope more people figure out how to get laid off on purpose to negotiate a severance package. The severance package will provide for a financial runway to do a lot more things in a stress-free way.

Never quit, get laid off instead!

Sam

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2 Pamela Car

These are great tips! I was just laid off due to a corporate buyout – 1 day notice. I had to hustle to find out my rights and get coaching on how to negotiate my severance package, which I did successfully. I am looking at this as a great learning experience and an opportunity to take the next step in my career sooner rather than later.

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3 Derek

That’s good that you have apply for unemployment as tip #1. It is so important to get this ball rolling early so that you can focus on those other tips you mentioned. I hope to follow Sam’s advice some day and get laid off instead of quitting 🙂

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4 Angelica Klein

Great tips. Look for training programs where you can meet with other people looking for work. This will serve as a support team, you will be learning new skills or refreshing some that you have not recently used. You will be so busy, and feel productive that you will have no time for getting depressed over the lost job.

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5 Eric Bowlin

Use the opportunity to start your own business. Don’t stop applying for jobs and such, but now with all that free time you can actually start that business you always wanted.

Under similar circumstances, I got into real estate full time and have never looked back. Life is good when you work for yourself.

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6 Simon L

It actually happened to me and I started my own business. With the money I got as a compensation for that unexpected reaction of that company I used to worked for, I opened a coffee shop . Saved part of the money (which i invest it myself) and the rest of the time im in one of the shops (now I have 2 coffee shops in town). Im very happy now, but dealing with all the process was a bit stresfull.

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