How to survive a layoff and protect your finances
As more Americans are losing their jobs, these tips can protect your finances, secure health insurance and help find your next job fast.
Layoffs are spreading, making it more likely you or someone you know has lost a job.
Amazon and UPS recently announced tens of thousands of job cuts, and some economists predict more on the horizon. Major companies have shifted to cutting workers after hanging onto them since the pandemic out of fears of a labor shortage. Now, with the economy slowing, costs rising and artificial intelligence (AI) allowing companies to work more efficiently, companies are trimming what they say is fat.
Losing a job can be traumatic, but it doesn’t have to ruin your finances, experts said. Staying calm and quickly taking necessary steps to protect yourself and your finances will help you survive until the next job comes along experts say.
“Suddenly losing half of our household income was…terrifying,” Chris Sherman, a product manager who got laid off, wrote in a blog. “My wife and I live in Seattle, have two kids and two mortgages, so our monthly expenses are high. Luckily we started our life together earning very little, which helped us build good financial habits early…we were able to weather the change without significant financial damage.”
How do you survive a layoff?
Below are some tips from experts:
- Examine the pink slip. Employers cannot require you to sign exit paperwork before being allowed to leave, or withhold pay for not signing. So take time to review the terms and maybe, even negotiate items like severance, health insurance, stock options, or placement services to get another job. All workers have protections, with those over 40 having additional safeguards under the Older Workers Benefit Protection Act (OWBPA). To release the company from age discrimination claims, older workers must be given at least 21 days to consider the offer and 7 days to revoke their signature in an individual lay-off, among other provisions. For a group lay-off, the employee must be given 45 days to consider the severance agreement.
- Get a recommendation. Ask a manager or someone at the company you had a good relationship with for a letter of reference or ask if they’d be willing to be a reference in the future. Make sure to exchange contact information before leaving.
- Make a plan for health insurance. Companies with 20 or more employees generally offer continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) that covers you and your family for up to 18 months. But COBRA isn’t cheap, and it may require you to pay the entire premium, up to 102% of the plan costs, according to the Centers for Medicare and Medicaid Services. If available, moving to a spouse’s work health insurance policy may be less expensive. You may also check the Affordable Care Act plans at the Health Insurance Marketplace.
- Review finances.
- File for unemployment insurance (UI) benefits immediately. Requirements differ between states, with some requiring a one-week waiting period before someone qualifies for payments. Check the Department of Labor’s website at Unemployment Benefits Finder | CareerOneStop on how to file for UI in your state.
- Check any income sources you can tap right away. That includes emergency funds or loans from friends or family. One of three people who hadn’t been laid off have offered, given or lent money to someone negatively affected by layoffs or the current economic climate, according to a 2023 Quicken survey of 865 adults. Their generosity starts with family, as people are most likely to give to siblings (81%), their spouse (79%), their own children (76%) and their parents (75%).
- Cut expenses like take-out meals, subscription services and memberships that you can live without, at least temporarily.
- Don’t forget your 401(k).”Once you’ve been laid off, you or your employer won’t be contributing to the 401(k),” said Samuel Eberts, financial adviser at retirement planning firm Dugan Brown. “Consider becoming the owner of your retirement savings by rolling 401(k) funds into a Roth IRA.” In some instances, you can leave your 401(k) at the company but “you won’t be able to make contributions and you’ll still be subject to administrative fees.” Only cash it out as a last resort, he said.
- Update your resume. Add new skills and experience to the top, using words targeting specific roles you have in mind for your next job. Online AI tools like Wisedoc resume builder can help. Don’t forget your LinkedIn profile, cover letter template, and portfolio, too. Consider adding to your skills by taking free and inexpensive upskilling courses like Google’s career certificates.
- Apply for jobs. Begin with companies you want to work for and jobs you want and are qualified for. Tap the hidden job market by reaching out to hiring managers and decision-makers directly to share what you can offer their company.
- Talk to a professional. If you still feel overwhelmed, consider consulting a professional either for resume, financial or emotional help. U.S. national nonprofit Empower Work connects individuals facing work-related challenges with trained peer counselors for free, confidential, text-based support.
Bonus tip
After you get the job, make sure to look at your 401(k) again, advisers said.
“Consider transferring your 401(k),” Eberts said. “Combining 401(k) investments into one plan makes it easier to track performance. Your new employer’s retirement plan may also allow you to meet your financial goals more quickly.”
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.