Even though a layoff is not a new scenario, they have recently received quite a lot of attention.
As a matter of fact, most businesses are experiencing slow growth, and the threat of recession is looming.
In the midst of all the news of companies like Twitter, Peloton, etc., cutting down their workforce, getting worried about a possible job loss is quite a valid concern. This concern is even stronger when your company is having or is about to have a layoff.
According to PwC Pulse Survey, among business leaders, about 50% wish to cut their overall workforce, about 46% may eliminate or reduce signing bonuses, and 44% will rescind offers.
While the statistics may change, it is best to be cautious with your finances in the current uncertain economy.
If you are concerned about a potential layoff, don’t wait till the news is confirmed. Take steps now to prepare your finances for an expected layoff.
Here are some important steps to take when expecting a layoff.
How to prepare finances for an expected layoff?
Determine how much you should save money
To financially prepare yourself for an expected job loss, you must first sort your essential expenses in your spending category and create a budget. Your budget should account for enough money to last until you get your next job.
Also, when expecting a layoff, it is important to reduce your expenses as much as possible and start saving.
Begin adding more money to your emergency fund or create an emergency fund if you don’t already have one.
Ideally, it is advised to have at least six months of living expenses saved for an emergency. It accounts for monthly expenses like rent, traveling, food, medical, utility, etc.
If saving several months' expenses is not feasible, set a target of saving a few weeks’ expenses. Try to cover at least six weeks' worth of expenses. You may begin by setting aside a small portion of your paycheck as soon as you receive it and gradually increase the amount.
“To determine the average amount you need to survive within this period, you can go through your credit card statements or bank account history to see how much you spend weekly or monthly,” suggests Michael Alexis, CEO of Team Building.
Create a high-yield savings account to serve as an emergency fund.
You must first figure out how much you will need to get by every month. Create a budget and reduce your less needy expenses wherever possible. After determining the amount to save from your paycheck, begin stashing away the amount.
Consider storing your emergency fund in a high-yielding savings account. It offers a considerably higher interest rate or annual percentage than a checking or a regular savings account. This way, you can earn some interest on your money while it rests until an emergency.
Pay off your debts.
Besides saving for an emergency, you should also focus on paying your debts.
Having debts is often a big burden on people. This burden can be even more impactful when unemployed. In case of a layoff, having crushing debts will be the least you want, adding to your troubles.
To avoid the situation, you should look for ways to pay off debt while you still have your paychecks rolling.
Depending on the type of debt, for example, credit card debt, federal student loans, etc., there may be various ways to reduce or ease your monthly payments.
You must prioritize paying off your high-interest debts, like a high-interest credit balance. Find ways to pay off your credit card debt or reduce the debt.
Again, you may consider consolidating your debt for a lower interest or a debt management plan to help you with your debt payments.
Take a side hustle.
With all the buzz about layoffs and recession, considering a side hustle for some extra income makes the most sense. Look for additional scope of income that can be done from home or doesn’t take up most of your time.
Think about a hobby or an interest you can turn into a side hustle to earn extra cash. For example, painting, photography, music, driving, etc.
“Sign up for Uber, Instacart, or similar programs now so that you are ready to start strongly when you need some cash to come in the door versus waiting and then having a few weeks gap to get through the background checks and paperwork,” suggests Nikki Ryberg, a career coach.
Find out about unemployment benefits in your state.
Find out if your state provides unemployment insurance. Each state provides unemployment insurance benefits, although they adhere to the same federal guidelines.
It will be helpful to familiarize yourself with the unemployment benefits in your state and how to apply for them.
Strategize your current benefits.
Make the most of your current company benefits while they are still available. For example, schedule the doctor’s appointment you have kept on hold or get the check-up you need.
In addition, continue making contributions to your 401k.
You may also strategize your contributions to get the most benefits. For example, consider maxing out your 401 k if your contribution is lesser than your company match. Even though it is stored in a retirement account, you can transfer it to an IRA when leaving the company.
Alternatively, if your contributions are more than your company will match, you can reduce them to avoid surpassing them. It helps to increase your paycheck, which will be helpful to contribute towards your emergency savings.
Think of your health insurance.
When you get laid off, your company will stop paying for your health insurance. This means handling your health-related issues may not be the same.
However, maintaining coverage is critical. “By the Consolidated Omnibus Budget Reconciliation Act (COBRA) stipulations, you can still enjoy health insurance coverage from your employer within 18 months of being sacked,” said Lotus Felix, CEO of Lotusbrains Studio.
Seek financial consultation.
Getting laid off can be a rough phase where important financial decisions must be made. For example, figuring out where the money will go or how long you may need the money to last.
It can help to consult a rational friend, family member, or financial professional. “If you are preparing for an expected layoff, get your finances in order through affordable—or even free—help,” suggested Shaun Connell, CEO of Credit Building Tips.
Consulting an affordable financial advisor can help you figure out ideal ways to make your money last, help in dealing with your debts, and improve your financial standing.
What other steps to take when preparing for mass layoffs?
If you are afraid a layoff is coming your way in the near future, it will help to prepare a layoff plan and start working on it as soon as the news is confirmed.
Update your resume.
Always keep your resume up to date. Update every skill, training, achievement or reward, etc., in your resume. This is especially important when looking for a new job. You may need to upload it to various job-seeking websites or send it to family and friends when networking.
Start networking.
Talk to your family, friends, and coworkers. Let them know you suspect a possible layoff at your company and ask them to inform you of any possible job offers suitable for you.
Implement your new spending strategy before job loss.
Keeping the above financial strategies in mind, inform your family of your situation, create a strict budget, and stick around. A cleverly crafted spending plan can help you look through ways to reduce your spending and save as much as possible.
Look for courses to upgrade your professional skills.
Generally, people must always look for ways to update their skills and certifications. This is an important step in career building.
But in case of a layoff, this becomes even more helpful. Taking full advantage of any course or certificate provided by your company and networks can help your job search.
Alternatively, you can enroll in reasonable or free online courses that can help to upgrade your skills and value.
Do your research.
Do your research and stay updated on what's going on in your current field. It helps you understand what an employer in your field may be looking for, and accordingly, you may improve and apply for any new job.
Consider if a career change is a suitable option for you.
You may love your job or be extremely comfortable in a particular field. However, it may also be an ideal time to consider a career change. It may be beneficial to be open to opportunities or better income.
If your field is getting smaller or closing on opportunities, you could consider learning and developing skills in a different field.
Do not panic.
Losing your job can be a piece of unpleasant and upsetting news, but one of the most important things to do is keep calm. Do not panic; instead, focus your attention on thinking forward, like managing your finances, updating your skills, networking, and looking for job opportunities or earning some extra money.
Final Thoughts
It is undoubtedly unpleasant to consider a layoff coming your way. But with the current economic scenario, it is best to be prepared for a pink slip before the case arises.
There are various ways to ensure you are financially covered in the event of a layoff. For example, you can create a budget, build a strong emergency fund, pay off your debts, plan your health insurance, etc.
Taking these financial steps can help to prepare your finances, making the layoff less impactful on your life or reducing the financial consequences.
