Even in the best of times, layoffs can occur as companies restructure, merge or go out of business. Sometimes, the writing is on the wall, but other times layoffs happen without warning.
“Getting laid off is often unexpected but that doesn’t mean we can’t prepare for it,” says Jordan Mangaliman, founder and retirement advisor with GoldLine Financial Services in Fullerton, California.
Regardless of whether layoffs are imminent at your workplace, take the following 10 steps to ensure your finances are prepared for if and when the cost-cutting axe falls.
1. Review Your Budget
All workers should have a firm grasp on how much they need to cover essential household expenses.
“People just don’t know what they are spending anymore, and then they don’t know why they don’t have money at the end of the month,” Mangaliman says.
[Read: How to Make a Budget — and Stick to It.]
If a pink slip should land on your desk, you don’t want to be scrambling to determine how much severance you need or whether your unemployment checks will cover the basics.
Regularly review and update your budget so you can successfully implement the steps below.
2. Investigate the Cost of Replacing Benefits
When you’re laid off, you lose more than your paycheck. You also stand to lose valuable benefits, most notably health insurance.
While some employees are entitled to continue their workplace health plan through what is known as COBRA, they’ll be responsible for covering the entire cost of the premiums themselves.
“People might not realize how much their employer pays for health insurance,” says David Flores Wilson, a certified financial planner and partner at Sincerus Advisory in New York City.
That cost may put paying for COBRA health insurance out of reach of some employees, and workers should consider their other options. Those may include moving to a spouse’s plan or buying a plan on the government health insurance marketplace.
Either way, keep in mind that you might need to make changes to your budget to accommodate the new premiums.
3. Build an Emergency Fund
Creating an emergency fund is another smart strategy for all workers, regardless of whether layoffs are looming.
“Just leaning into best financial practices is something we all can do,” says Annie Cole, a money coach with Money Essentials for Women and author of “101 Ways to Earn More, Build Wealth, and Live Rich in Your 30s.”
An emergency fund is the bedrock of sound household finances, and most experts advise that people save enough to cover at least three to six months’ worth of expenses.
[Related:Good Reasons to Spend Money from Your Emergency Fund]
4. Pay Down Debt
“Paying down debt is always a good idea,” Mangaliman says.
Eliminate high interest credit card balances while you still have paychecks flowing and consider paying off other loans and lines of credit to reduce your required monthly bills. This step will make it easier to get by when you are living on a reduced income between jobs.
5. Make Yourself Valuable
If there is talk of layoffs, now is the time to ramp up your efforts at work. Ditch any thought of quiet quitting — which is doing the bare minimum — and instead prove that you’re pulling your weight in the workplace.
Also, don’t be afraid to speak with your boss or supervisor, Cole says. Ask their advice on where you might be able to improve or how you can increase your chances of surviving any workforce pruning that might take place.
Of course, you can’t be defensive about any constructive criticism your boss offers, and you need to put their advice into action for this tip to be effective.
6. Update Your Résumé
Even as you’re working to preserve your current job, keep an eye on the future. Brush up your résumé, add skills to your LinkedIn page and touch base with your references. If you see a position that’s a good fit for you, go ahead and apply.
“I don’t think there is anything wrong with applying for jobs when you hear about layoffs,” Coles says.
7. Reconnect With Your Network
Along with refreshing your résumé, make time to reconnect with past mentors, colleagues and other professional contacts.
“Now is the time to be proactive and not reactive,” Mangaliman says. “It’s a great time to network.”
Depending on the situation at your workplace, you may want to discretely let close contacts know that you may be seeking new employment soon.
Otherwise, make a point to attend mixers, conferences and other events where you can meet people in your industry and keep your eyes and ears open for job opportunities.
8. Negotiate Your Severance
While you’re networking, take the time to find out what is normal practice for severances in your field. “Talk to others in the industry about standard severances,” Wilson says.
If you’re in a position to receive a severance, evaluate the offer with a critical eye and consider whether you might be entitled to more.
“It depends on how senior they are, and it depends on the industry,” Wilson says. “We’ve actually seen situations where someone retained an attorney and executed their retention rights.”
9. Start a Side Hustle
You can also get ready for a layoff by starting a side hustle. That could be working a second unrelated job, offering consulting work in your professional field or picking up gig work like ride-sharing, delivery services or freelancing.
“It’s always good to have other sources of income,” Mangaliman says.
In the event you aren’t laid off, the extra money can pad your emergency fund, pay down debt or be saved for future financial goals.
[READ: 7 Things to Know Before Starting Your Side Hustle]
10. Have a Plan and Stay Optimistic
A layoff doesn’t have to be all bad news, Wilson says, who was laid off during the financial crisis of 2008. “This is a great time to step back and look at the big picture,” he says.
It’s an opportunity to reevaluate where you are in your career and where you’d like to be. If you’ve been wanting to pivot to a new field or looking for a time to go back to school, this may be it.
Even if you have trouble finding the silver lining in your situation, Wilson recommends having a plan for how you’ll spend your days when you’re not working. Doing so will help you make the best of a bad situation.
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How to Prepare Your Finances for a Layoff originally appeared on usnews.com
Update 09/23/24: This story was previously published at an earlier date and has been updated with new information.
