A few years ago I got laid off without warning; or maybe it was fired for no reason? Either way, it was at no fault to me which meant I qualified for unemployment benefits… which were a nightmare to get so ultimately I had to bounce back financially after a layoff on my own. I was faced with big questions like: where do I go from here? Do I look for a new job? How do I budget after a job loss? With the rise of unemployment today, I wanted to share my top tips for handling your finances if you've been terminated from your job; or you think a layoff is coming. I really want to stress this: while every situation is different, losing your job is not the end of the world. You will recover from this. Life may not look the same, but you will keep moving forward.
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If you're looking for tips to save money when laid off, I have an entire money saving series here with specific tips for most of life's major milestones and every day experiences!
Table of Contents
Money Moves To Make If You're Worried About A Job Loss
- Divert retirement savings into an emergency fund
- Reduce spending
- Start looking for a new job + cautions
- Create a plan to negotiate a severance package
How To Bounce Back Financially After Being Laid Off / Fired / Terminated
- Get help: Government, local, credit
- Treat your credit card like a debit card
- Reduce spending and revisit your budget
- Revisit your health insurance
- Analyze current situation
- Set a limit
- Revisit retirement when the time is right
- Set yourself up for success in the job search
- Remember, life is cyclical.
Alright, first up, I'm sharing money moves to make if you're still employed, but think you're about to be laid off. Then I'll share all my financial tips for what to do after being laid off, terminated, fired, whatever the case may be.
Money Moves To Make If You're Worried About A Job Loss
If you still have a job but are nervous about potential layoffs in the near future, there area few money moves you can do now to better prepare your finances in case you do lose your job:
Divert retirement savings into an emergency fund
According to this article from Lexington Law, a lack of savings can increase your debt. Given the current financial times of 2020 and the rising number of unemployed individuals, I'd suggest preparing yourself for an unsteady paycheck by putting at least 9 months (ideally 12-15 months) of money into an emergency fund. This could be a good time to divert money that you were putting towards your retirement into your savings; especially if your employer is not matching that money.
If your employer is matching your retirement contributions, you may want to find money in your budget elsewhere to begin stacking your emergency fund. Read my complete guide to emergency funds here.
Don't wait to get fired to begin reducing your spending and revisiting your budget. Look at your spending and see where you can cut back. Maybe you don't need a subscription to three different TV streaming services?
Maybe you can cook dinner at home one more night a week than you already were. Get creative and use these 25 Personal Finance Hacks You’ll Wish You’d Learned Sooner.
Start looking for a new job
The best time to look for a new job is when you already have a job! Of course the job search is more nuanced when you're still employed compared to when you've been terminated, but it's still worthwhile to begin looking. Keep these tips in mind:
Update your LinkedIn with caution
Yes, you want an up to date LinkedIn, but your current employer and coworkers may receive notifications about the changes you're making to your profile. Meaning you could inadvertently move your name to the top of the layoffs list if they know you're looking. Read more Social Media Mistakes Hurting Your Job Search here. Instead, try focusing on updating your resume, and building relationships privately. Most people receive the best job leads and are more likely to be hired from a relationship in their existing network. Instead of publishing something for the world to see, reach out to former co-workers, college friends, etc. simply to reconnect and explore.
Don't take a new job just because you get an offer…
Just because you start looking for a new job, networking, and building relationships does not mean you need to take a new job. The simple act of creating warm leads right now can put you on better footing if you do find yourself laid off.
Remember: The last hired is often the first fired.
Don't jump the gun on switching employers for a lateral move; especially if you aren't 100% confident your job will be secure. See if you can negotiate assurances for job security given the current landscape, or at the very least, a really nice severance package if you're terminated before a year, two years, etc.
Create a plan to negotiate a severance package
Ideally when you were originally hired you negotiated a severance package. However, if you didn't, now is a good time to start coming up with a plan of what you'll ask for if laid off and any supporting evidence that you should be given it. It's a long shot to ask for severance when you're being let go from a company and don't have anything about it in your employment agreement, but it never hurts to ask especially if you are being laid off for no fault of your own.
Personally, I'd put something together showcasing your value and just how much you've benefited the company using hard numbers. This will put you in the best light for getting some bonus, and if not, it may help you build your confidence as you go back to the job search, put you in the light as the first rehire when the company is doing better, or motivate them to help you find a new lead if possible.
How To Bounce Back Financially After Being Laid Off / Fired / Terminated
When you lose your job, it can feel embarrassing. Personally, I struggled with a lot of shame around the trauma from being fired. But now is not the time to pretend you're okay when you're really struggling. Instead, ask for help and utilize programs available to you. Getting help will only help you bounce back faster after a layoff.
Government level help:
Apply for unemployment benefits, look into welfare or food stamps. Every state has different rules, regulations, and applications so look into what your state offers and see what can help you make this uncomfortable time a little more manageable.
Local level help:
Many organizations exist to help those who have fallen on tough times. Some churches and nonprofits offer food pantries with free meals or groceries, others may have clothes, toys, or supplies for your kids. These can often be found via word of mouth, on local Facebook groups, a quick google search, and even sometimes on your city or county website.
Credit level help:
if you believe you have any inaccuracies on your credit profile, reach out to Lexington Law today for your FREE credit report consultation. These types of inaccuracies often occur if you've been recently divorced or on military leave, and also if you have student loans or medical expenses (which I'm sure a lot more people are experiencing right now!). Poor credit can end up costing you more in interest, which is something you'll definitely want to lower during this tough financial time.
Treat your credit card like a debit card (to the best of your ability)
To the best of your ability, try to only charge what you can pay off that day. In fact, when I lost my job twice in a month a few years ago, I got into the habit of paying my credit card at least every week, if not every day. By keeping this intimate relationship with my spending, I had a really clear picture of what was going on, and it provided motivation to stay on track with my new budget.
Reduce spending and revisit your budget
Ideally you've already reduced spending, but now is a good time to see if you can cut back even more. Budgeting after a job loss can be the big difference between debt and keeping your head above water.
What were the “nice to haves” that you were holding onto because you still had a steady paycheck? Remember, money and stuff can always find its way back to you. But practicing good financial habits is a form of self love that will pay you dividends.
Revisit your health insurance
Upon losing your job, you may lose your health coverage or be asked to pay more money to stay on your current plan. When you lose your job, you qualify for a special open enrollment period through the marketplace. Take some time to submit an application and see what alternative insurance plans are available to you. It may make sense to switch to one of those to reduce your monthly premium.
Analyze your financial situation
Look at what is currently on autopay or auto save and see if anything needs to be paused for a while.
While I wouldn't do this as a first move: consider a lost interest or no interest credit card. The caution here (particularly with no interest credit cards): is they are only no interest for a short period of time, then the interest rates are insanely high. Only do this as a last resort; because again, you want to view your credit card as a debit card to the best of your ability.
Before applying for a new credit card make sure you read: What You Need To Know Before Applying For A New Credit Card so you don't unnecessarily negatively impact your credit score!
Get a clear picture on how much money is in your emergency fund, what your weekly budget is, and how long you can comfortably go before getting into debt. While the thought of analyzing your accounts may kick up some anxiety, I assure you, it's nothing compared to the anxiety you'll feel if you ignore them and find yourself in a really bad financial situation in the coming months that you'll need to repair.
Give yourself a limit
If you're anything like me, you may need to take some time after losing your job just to recuperate. It was one of the best things I did for myself; but I also did it with a limit in mind. I looked at my emergency fund and chose a number I didn't feel comfortable letting it drop below. At that point, I knew I'd go back to a minimum wage job or get creative with ways to make money after being laid off. Lexington Law has this helpful infographic and post on how to make passive income and breaks it down visually (what requires more money to get started versus time, so in that case, you're looking for things that require your time, not money).
I used that time after losing my job to recover from the emotional and mental turmoil, then started working on my side hustle which has grown to this blog 4 years later and has been the sole income for my family the last couple of years.
Let yourself grieve – but put a deadline on it. Then set another deadline for when you'll need to get back into your career or start a side hustle. If those don't pan out, then take an undesirable job. There is NO shame in it. My dad was a telemarketer for septic tanks during one of his strained financial times when I was a kid. You just do what you need to do for yourself and your family.
Revisit retirement when the time is right
If you've diverted money initially earmarked for retirement, don't stress about it; but also don't forget about it forever. Lexington Law has this helpful article on catching up on your retirement contributions. Sometimes we have to take our foot off the gas on a goal in order to arrive at an even better destination.
Just because you've taken this time to step away from your retirement savings, doesn't mean that you'll never have enough money to retire. That's a scarcity mindset. Instead, shift your mindset and believe there is enough money out there and you will have more than enough money to retire.
When I lost my job twice in a month, I was definitely scared about what it meant for my financial future; but I also realized that the career path I was on had a pay ceiling (I'd never earn more than a certain amount annually). I used the time after being fired to come up with new ways to increase my earning potential and am happy to say that I make more today than I ever would've in my previous career.
Set yourself up for success in the job search
Now would be the time to update your LinkedIn. If you parted on good terms, ask your former employer for recommendations or if they know of any leads. Read more of my Best Uncommon Job Seeking Tips That Will Actually Help. Also, remember my tip from early about severance allowance! Be sure to negotiate that into your new employment agreement when you do get a new job!
Remember, life is cyclical.
Just because you lost your job today and *may* experience hard financial times, does not mean that this is forever. A new job will come in, your finances can recover with smart money moves, and you will keep moving forward. We've all been through hardships, it's our choice in how we respond to them. We can let them define us, or define them.