What to Do Financially After a Layoff

Losing a job can put a lot of financial decisions in front of you at once. You don't have to make all of them today.

A layoff can change your finances in a single meeting.

The paycheck you expected next month may not be coming. Health insurance has an end date. There could be severance paperwork to review and benefits you need to make decisions about.

Some things need attention fairly quickly. Others can wait.

Here's where to start.

Get the details from your employer

Before changing anything, find out exactly what you're leaving with.

When will you receive your final paycheck? Will unused PTO be paid out? Are you owed a bonus, commission, or other compensation?

If you're receiving severance, check the amount, payment schedule, and any benefits that continue while you're receiving it. Your employer may also provide information about health coverage, retirement accounts, stock compensation, or other benefits affected by your departure.

Write down the important amounts and dates so you know what's still coming and when it ends.

Apply for unemployment

Check your state's unemployment rules and apply if you may be eligible.

Severance doesn't necessarily prevent you from receiving benefits, although the rules vary by state and situation.

Because there can be time between applying and receiving your first payment, this is worth doing early rather than waiting until you need the income.

Figure out your health insurance

Find out the exact date your employer-sponsored coverage ends.

Depending on your situation, your next coverage could come through COBRA, a spouse's or partner's employer, or the Health Insurance Marketplace.

Compare the actual costs and coverage available through each option. Premiums matter, but so do deductibles, prescription costs, provider networks, and expected medical expenses.

Pay attention to enrollment deadlines too. You don't want to discover the option you preferred is no longer available because the window closed.

See how much time your cash gives you

Add up the money you can access easily, including checking, savings, and your emergency fund.

Then look at your regular expenses.

Start with housing, food, utilities, insurance, minimum debt payments, and other bills that need to be covered. From there, identify expenses you can pause or reduce for a while.

You don't need to eliminate everything optional. Focus on changes that make a meaningful difference to how long your available money will last.

If you know you have six months of expenses covered rather than two, you'll have a much better sense of how quickly other decisions need to happen.

Adjust your approach to debt

If you're able to keep making required payments, do.

But plans to pay extra toward debt may deserve a temporary change while your income is uncertain. The additional cash could be more useful sitting in your account until you're working again.

If you expect to have trouble making a payment, contact the lender before the due date. Ask whether hardship programs or other payment options are available.

You can return to a more aggressive payoff plan once your income is predictable again.

Take your time with your 401(k)

Losing your job doesn't mean you have to immediately move the retirement savings you accumulated there.

Depending on the plan, you may be able to leave the account where it is, roll it into a future employer's plan, or move it to an IRA.

Before choosing, compare the investment options, fees, account rules, and tax considerations.

Be especially careful about withdrawing the money to cover current expenses. Depending on your age, account, and circumstances, a withdrawal can result in taxes and potentially penalties. It also permanently removes money that had been set aside for retirement.

If you reach the point where retirement savings may be needed, understand the cost before taking money out.

Hold off on big financial changes

A layoff can make financial plans that felt settled a month ago suddenly seem uncertain.

You may need to postpone a purchase, spend some of your emergency fund, or change what you were planning to save this year.

That's different from needing to overhaul everything.

Until you know more about your next job and how long the transition will last, be cautious about selling investments, changing your long-term strategy, or abandoning goals you were previously on track to reach.

For now, work with the numbers you have. Update them when unemployment begins, when severance ends, when your insurance changes, or when you have a new offer.

You can make the longer-term decisions when you have more information.

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summary

After a layoff, confirm your final pay and severance, apply for unemployment, and find new health coverage before any enrollment deadlines pass. Figure out how long your available cash can cover your expenses and consider pausing extra debt payments while income is uncertain. Your 401(k) and other long-term financial decisions can usually wait until you have a clearer idea of what comes next.