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How to Prepare Yourself, Financially, for a Layoff

There’s a pretty decent probability that you’ll suffer through a layoff in your lifetime. That’s because each year, between 13% and 19% of the workforce is laid off. 

While some layoffs are expected, many others come as complete surprises. 

Just ask my husband and I, who have endured 4 layoffs (all surprises) between the two of us in the last decade. 

Needless to say, between the filling out the exit paperwork, filing for unemployment, and finding that new job, we’ve definitely figured out how to survive unemployment.

That first layoff each of us endured was way worse than the succeeding layoffs. Why is that? Because after the first round, we realized there were things we could do that would prep us for future layoffs. And then we did them. 

I’m going to share with you some of the best ways to prepare for a layoff ahead of time, given the fact that you might be facing one sooner rather than later. 

Prep Tip #1: Prep Your Emergency Fund

Do you know the average time it takes for a newly laid off worker to rejoin the workforce? Right now, it’s 21.7 weeks, or around 5 months. 

In our experience, this is pretty dead on – our shortest stint of unemployment was 3 months, and our longest was 5 months. 

What you need to do right now, while you’re still getting those paychecks every other week or weekly, is to make sure your emergency savings fund can last for at least a 5-month period of unemployment (I’d go for 6 months, if I were you). 

Tip: Can’t find any extra money right now to throw into your savings account? I dare you to walk away without ideas for squeezing money from your paychecks into savings with these 250 saving money tips.

Prep Tip #2 Get a Better Understanding of Your Rights

Did you know that you have rights as an employee, if a layoff occurs? 

You see, the day you actually get laid off can be very emotional and shocking. So, you don’t have much time to really think things through. 

That’s why it’s important to know what your rights are ahead of time. 

The biggest one you need to know? You can negotiate your severance package: It’s totally true. So, don’t sign anything while you’re in the office and not thinking straight. Tell them that you will look over everything at home, and get back to them with a response by the deadline. 

Prep Tip #3: Set Your Resume Update on Rotation

Don’t wait until you’ve been pulled into your boss’s office for a layoff and have had to turn over your computer, files, and everything else to your employer to update your resume. 

Instead, resolve to update your resume on a consistent basis. This makes it much easier to do.

In fact, go ahead and set a reminder in your online calendar now, for every 3 months of this year, to sit down and update your resume to capture all the juicy details of what you’ve been working on, mini-promotions, new duties, etc. 

Prep Tip #4: Pay Off Your Debts

Listen, I can tell you from experience that our debt load would have sunk us in unemployment. Getting ourselves debt-free (minus the mortgage) was KEY in us surviving each of these three layoffs, financially speaking. 

To give you an idea, when we were in debt, we were sending $950/month to our debtors. Granted, we were sending more than the minimums, but the minimum payments still would have been around $500/month. 

Do you know what the average unemployment insurance check looks like? If your total pay each month is $3,200, then an estimated amount – depending on your state – is around $123/week. That’s not much, and would not even have covered our debt payments, let alone groceries, the rent/mortgage, gas, etc. 

Do yourself a favor, and pay off your debts before you find yourself laid off. 

Sometimes a layoff is a blessing, and sometimes it’s a complete shock and you have to almost reinvent yourself. We’ve each been through both kinds, and have learned much from each. No matter what, it’s more likely now than ever that you’ll experience unemployment in your career. Because of this, I urge you to complete even a few of the steps above so that your next surprise layoff won’t be so bad. In fact, you might even get to enjoy part of it as a mini-retirement while in-between jobs. 

Bio: Amanda L Grossman is the brain behind FrugalConfessions.com, where she helps Chief Family Officers (CFOs) learn how to control their money so that they can save a lot of it and live they life they want. You can also find her at MoneyProdigy.com, where she partners with Mamas to teach their kids all about how to manage money through money educational adventures, like the Mt. Everest Money Simulation. 

6 Comments

  1. Xrayvsn
    Xrayvsn March 20, 2019

    Everyone likes to think it can’t happen to them but even docs are expendable. My clinic let go of 2-3 docs in the past couple of years and it was a bit of a shock when they found out.

    It is tough enough without debt and being laid off, much worse when you still have debt hanging over you.

  2. Dan
    Dan March 20, 2019

    Another thing to keep in my is that there can be a significant delay between the time you apply for unemployment benefits and when you begin receiving the benefits. You should be prepared to go for a few months without unemployment benefits.

    Also, most people mix personal & work files. There are probably personal files on your work computer. You should periodically move those files (or copy) to a personal device like a memory stick. Sometimes when you are laid off, you are not allowed access to your computer for fear of stealing corporate secrets or sabotaging process due to concern of resentment of being laid off.

    Also when you are laid off, you typically are covered by workplace medical/dental/vision insurance for the remainder of the calendar month. Unless you are laid off on the last day of the month, you should try to schedule one last medical/dental/vision appointment in the calendar month you are laid off.

    I make my charitable contributions in the end of the year, once I know that I will have enough to itemize. State income taxes are a big reason I am able to itemize so if you get laid off in March & it takes 6 months to get a new job, you may not have enough to itemize that year. That may or may not affect your decision to donate to charity or it may affect the timing of your donation (i.e. double your donation the year after you get laid off).

    Similarly, I front load my 401k contributions into the first half of the year. If I get laid off in March, I have contributed more than 25% of the annual limit. You have to do the math to figure out the minimum periodic contribution to maximize you company’s 401k match. If you look at my contributions over the 12 month calendar years, it would be something like 20% for Q1 & Q2 and then 6% for Q3 & Q4 because my company only matches up to the first 6% of my contribution.

  3. Mr. 39 Months
    Mr. 39 Months March 21, 2019

    All sound points and good advice. While I luckily haven’t had to deal with a layoff since 1991, I still follow a lot of the points you listed. I’ve done some job hopping over the last 25 years, and this calls for constant updates of the resume. Debt has been paid down and is now 0. Emergency fund well funded.

    I wish more folks followed the advice above

    • FullTimeFinance
      FullTimeFinance March 24, 2019

      I’ve dodged that bullet a few times but never been actually laid off either. I agree though great tips to live by.

  4. Christoph
    Christoph March 29, 2019

    Well written. I was not necessarily in a layoff situation, but was backstabbed by my manager and was consider to walk out. I ultimately stayed with the company in a different division, but I decided I would never be held hostage again.

    Since then I had a side-business – either actively working for it or on a backburner, but ready to be turned on the moment I would walk into the door from being laid off or if I would have walked. Let the others go home in shock; for me it was like come home, turn on the computer and be ready to roll. So, have a business or business plan at a point where it does not take much effort to flip the switch.

    • FullTimeFinance
      FullTimeFinance April 2, 2019

      Ouch! Always have a back up plan indeed.

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