planning next move if you're laid off

According to the Bureau of Labor Statistics, the U.S. unemployment rate is currently around 3.7%, which is still low by historical standards. Many companies are having trouble filling positions because the skills they need don’t match the skills in the available workforce. Recently, however, there have been waves of layoffs across several industries and sectors. Job losses still occur due to cost-cutting, restructuring, mergers and acquisitions, and other factors. Here are some steps to take and what to do if you are laid off from your job.

File for unemployment

File for unemployment as soon as possible. Unemployment benefits aren’t retroactive, so you don’t want to delay filing. Hopefully, you have a statement from your employer that you have been laid off and the dates they employed you. This will be helpful when filing.

Review your final paycheck

Check your final paycheck from your employer carefully. If you believe anything is missing, be sure to address it with human resources right away. Situations like this are why you save letters from human resources that explain exactly how your benefits work, including how vacation is accrued, how bonuses are accrued and paid out, and exactly how the vesting of any benefits is scheduled.

TIP: When you receive emails like these to your work email address, you should always forward them to your personal email address in the event you lose access to your work email with little or no warning.

Assess electronic devices and platform access

If you’re laid off, there is a possibility that you will need to turn over your company-provided cell phone and computer on short notice. While it is likely that your company’s policies restricted you from using your phone for personal files and activities, it may be that all of your contacts reach you on your company-provided phone. You’ll want to reach out to contacts to provide them with new contact information as quickly as possible. You may also want to update your contacts on recent events, as some may be able to help you find your next opportunity.

TIP: This is also a good reason to keep your contacts and personal files backed up and not depend on company-provided devices for anything other than business-related activities.

TIP: It is always a good idea to request access to your personal portals, such as retirement platforms and payroll, through means other than your company intranet. If you separate from your employer, you will still want to be able to access your payroll history and your retirement plan information.

Update retirement plan contact information

Make sure you ask for any contact information for retirement plans – including the pension administrator. Contact these plans and ensure they have your correct mailing address and contact information. They will contact you directly whenever they need to notify you of changes to your plan or for specific events related to your plans.

Project cash flow and expenses

You should already have a good idea of your living expenses and when each bill is due. If not, this is the time to gather all that information into an expense tracking or budgeting software. Don’t forget to consider that you may need to cover health insurance premiums at COBRA rates, which are often higher than what you may have been paying from your paycheck.

projecting cash flow and expenses - what to do if you're laid off

Make sure that you understand any critical benefits that you relied upon your employer for besides your paycheck. Loan payments being deducted automatically from your paycheck will cease, so you will have to get a new method set up quickly to avoid late payments. Gym membership or club membership fees may have been deducted from your paycheck. Then, determine how you will pay your bills. If you are receiving severance pay, you can use that. Otherwise, hopefully, you will be able to rely on unemployment compensation to a degree.

Unemployment compensation may not be as much as you’re used to making, so you may have to tap other sources of income. If you have investments that generate income, you may want to use some of that rather than reinvesting it. If unemployment compensation combined with any other income streams you have is not enough to cover your bills, then it’s time to dip into your emergency fund.

The Emergency Fund – An Essential Household Account

Ideally, you have enough cash in your emergency fund to cover at least three months of your regular living expenses, three months of reduced expenses, and an additional three months of essential living expenses. Hopefully, if you saw the potential for layoffs coming, you beefed up your emergency fund even further.

Losing a job is stressful both financially and psychologically. Being prepared with a sufficient emergency fund can help alleviate some of the stress. The comfort of knowing that your emergency fund is available can allow you to focus more on your job search without the distraction of worrying about how to pay your bills. As you use your emergency fund, you’ll want to keep an eye on your investments. You don’t want to be in a position where you must sell an investment on short notice at whatever price you can get because you’ve run out of liquid funds.

Keeping an eye on your investments may give you an opportunity to exit some investments more gracefully in case you need the cash in the near future. While borrowing money to cover expenses isn’t ideal, it’s good to know what all of your options are. Determine what credit you have available through home equity or personal lines of credit. Be sure to understand the interest rates and fees associated with each. Remember that if you need to resort to using credit to pay your bills, you will want to borrow at the lowest rates first. And keep in mind that interest rates on credit cards can be very high. Make sure that you understand the interest rates on your cards if you are deciding between tapping a line of credit or carrying a credit card balance.

Update healthcare insurance or enroll in COBRA

Understand when any insurance coverages obtained through your employer will terminate, including your health insurance, long-term disability, long-term care, and even pet insurance. Make sure that any claims you had outstanding under any of these coverages are submitted prior to the termination of coverage.

If your spouse is employed and has access to health insurance as a benefit, you should compare the costs of your spouse’s plan to the COBRA costs of your plan. Your loss of health insurance due to a change in employment status is a Qualifying Life Event. Generally, it will allow your spouse to change health insurance coverage outside the open enrollment period.

Flexible Spending Accounts (FSAs) often terminate soon after separation from your employer. In many cases, the account will be closed in as little as 90 days. Be sure that you understand the timing of events surrounding your FSA account so that you can submit any relevant requests for reimbursement and minimize any funds lost because the account was closed sooner than expected.

Plan your next steps

Getting laid off is stressful but manageable with a financial plan. Having a financial plan means you know exactly where you stand, what your assets are, what your liabilities are, and how your cash flow will be affected. While it won’t get you a new job, having a financial plan can help prevent some of the fear of the unknown. It allows you to know exactly what your financial situation is, the degree to which you were dependent on that income stream, and what you need as a minimum income when considering new job offers.

This article is intended to be educational and thought-provoking rather than financial advice. When we work together in a financial planning engagement, we discuss your unique personal situation and your unique goals. We examine these factors and many others during our financial planning process to determine appropriate financial strategies for YOU.

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