How to Prepare for a Layoff

By Scott Jensen, CFP®, ChFC®, CLU®, RICP®, AFFP®,  Financial Planning Consultant, COUNTRY Financial 

Mass layoffs have led news headlines over the last several months, and you may wonder if your finances could withstand a job loss. Take these steps now to safeguard your assets through a crisis. 

4 tips to help prepare for a layoff

1. Build your emergency fund

Prioritize setting aside 3 to 6 months of daily expenses that will be there for you in case of an emergency.  Remember there is a difference between an emergency fund and long-term savings – your emergency fund should live in a safe, accessible, liquid account, such as a savings account at your local bank. Your retirement account should not be considered an emergency fund. If you consume your retirement accounts now, you may irreparably set back your prospects for a viable retirement in the future. Learn how to build an emergency fund.

2. Understand your benefits and how to access them

You may have access to benefits from your current employer such as health insurance, life insurance, flexible spending accounts and a retirement plan. If you’re preparing for a layoff, it’s important to understand how to continue using those benefits, and where you’ll need to fill in the gaps to protect yourself and your beneficiaries. 

For example, a retirement account could be left in its current state or rolled over to an IRA or a new employer’s retirement plan. You may also have access to your health insurance for a limited time under COBRA, but that can be quite expensive. Other benefits like Flexible Spending Accounts and life insurance are likely not portable after you are no longer employed, so it’s important to talk with an insurance representative to make sure your loved ones are protected through a personal life insurance policy. 

3. Pay off debt

A COUNTRY Financial survey fielded in early 2023 found that approximately 2 in 10 Americans say they have a little too much debt but it’s under control. That could change quickly with a job loss. Make a plan now to combat your debt. Try the snowball or avalanche method, or manage your spending through a budget. 

4. Reassess your budget

Budgeting is a crucial step in achieving your financial goals and even more important if you’re facing a loss of income. Go through your expenses and discretionary spending with a fine-tooth comb to identify areas of waste and make as many cuts as you can. Every little bit you’re able to trim will help stretch your emergency reserves further and take off a bit of the pressure to accept a replacement job that might not be what you’re really looking for. If creating a budget is new to you, try our tips for creating a budget or use the 50-30-20 budget rule to get started. 

What to Do if You’re Laid Off from Your Job

If you find yourself in the unfortunate situation of being laid off, check into resources that may be available such as a severance benefit from your employer or government unemployment benefits. Some creditors may also allow you to adjust the due date on monthly payments, giving you some temporary breathing room as you make the transition. These and other possible resources can reduce the dependency on your emergency fund, helping to stretch that limited resource while you acquire new employment.

Preparing for a layoff isn’t easy. COUNTRY Financial can help you plan for the unexpected and deal with the hurdles that come your way. Learn more about our planning services.

Updated 4-27-23