Losing your job can be an extremely distressing experience — the loss of income can jeopardize your financial well-being, and being jobless has been a well-documented cause of mental anguish, stress, and depression. However, it’s important to remember that losing your job is not the end of the world. 

Job loss doesn’t have to be catastrophic — the key is to have a plan in place. If you’re concerned about being laid off in the near future (or if you’ve recently been let go), here’s how to plan and prepare for your financial situation.

How to prepare financially for a layoff

  1. Figure out your monthly budget
  2. Create a layoff strategy
  3. Supplement your income
  4. Stay ready, just in case

Ready to learn more? Let’s break it down step by step.

1. Figure out your monthly budget

Your first step to financially prepare for a layoff is to figure out what your monthly budget is. In order to plan and prepare for a period of joblessness and reduced (or no) income, it’s important to know what expenses you’ll need to cover.

Think about where your money is going each month — are you paying rent or a mortgage? Do you have a car payment? Credit card minimum balances or student loan debt? Streaming services and Spotify? You’ll need to aggregate all of your outgoing expenses for food, entertainment, vehicle costs — everything you spend regularly on each month. 

Seeing what you really need

In the course of defining your monthly budget, you might come across some expenses that you might not need anymore (more on this later). This is a great time to consider your wants versus your needs — especially if you’re facing an extended period of reduced (or no) income! 

On a basic level, our needs are the things that we just simply cannot go without — they’re essential expenses. We need a place to live, we need to eat everyday, we need to pay the utility bills that service our electric and gas, and we need to get from point A to point B. Wants, on the other hand, are non-essential expenses — new Ray Ban shades, a Gibson Les Paul, a trip to Fiji, and so on. 

If you’re looking at an upcoming layoff, you’ll want to only pay for your needs at this point. However, it’s important to remember that emotional needs count, too. Keep the small discretionary expenses that do a lot for you, like a cappuccino at your favorite cafe or buying a book at a used bookstore. 

You’ll also need to include minimum debt payments with your needs — you don’t want to tank your credit score!

Here’s a quick list with a few potential needs:

  • Rent or mortgage
  • Utilities
  • Groceries & gas
  • Credit card payments
  • Car insurance

If you have a health insurance plan through your employer, be sure to include that too. COBRA may let you keep your health insurance with your current provider if you’re laid off, but you’ll have to start paying for it yourself. You’ll also want to look into rolling over any retirement plan when you transition into new job, like your 401(k).

2. Create a layoff strategy

Once you’ve determined your monthly budget and have defined your month-to-month needs, you’ll want to begin to create a layoff strategy. Consider this a financial plan to keep afloat and cut costs while you’re on the job hunt.

Fast places to save

In the event of a layoff, you may need to cut back on unnecessary expenses while you line up a new job. The first step toward a plan is figuring out where you could cut back in a hurry — take a look at where your money is going and find places to rein it in. 

Here are some quick, easy places where most people could cut back in an emergency:

  • Streaming subscriptions — you don’t need to go cold turkey, but weigh the options of having a Hulu, Netflix, MAX, and Amazon Prime video subscription; think about keeping only one.
  • Cooking at home — food costs are still soaring, and you’ll really feel it at restaurants. Instead, save money by eating at the house. 
  • Slash that grocery bill — find ways to save at the grocery store by buying generic brands, using coupons, and only buying exactly what you need, saving on food waste. 
  • Walk or bike — if you live in a city, consider walking or biking to your destination instead of driving or Ubering. 
  • Ditch the music subscription — we’re not saying go without music, but we are advocating for getting rid of that Spotify subscription — you can stream tons of music for free on YouTube.
  • Mind the thermostat — whether it’s a hot summer or a cold winter, you don’t need to fully refrigerate or broil your home. Set your thermostat up a few degrees on hot days and down a few on cold ones to save a surprising amount of money on your utility bill. 
  • Shorter showers — use less water around the house. It’s better for the planet and can make your water bill lighter at the end of the month. 
  • Unsubscribe button — take yourself out of the path of temptation and unsubscribe from marketing emails that inundate your inbox.
  • Hang at the library — get yourself a library card to save money on books, music, videos, and more! Just remember to return your rentals on time. 

Planning ahead financially

If you don’t suspect an immediate layoff, take advantage of those fair weather times to plan ahead. Here are a few great ways to protect your financial goals on an ongoing basis.

  • Take care of repairs. Whether your car needs new brakes or you need to put a roof on your home, don’t put off repairs and maintenance. The last thing you need is a major repair expense at the same time as a layoff.
  • Shrink your energy footprint. Energy-efficient appliances and installations can be costly up front but can save you tons of cash in the long run. Consider switching to LED bulbs throughout your home, upgrading appliances, and replacing drafty windows. 
  • Pay off high-interest debt. Whether it’s credit card debt or a personal loan, pay off anything with a high interest rate as soon as possible. Getting ahead can reduce your monthly interest expense, boost your credit score, and improve your position with lenders if you need a loan later.
  • Start an emergency fund. After you pay off any high-interest debt, start a savings account for your emergency fund and work toward saving up enough to pay your minimum monthly expenses for 6 months. These emergency savings are specifically for disasters like being laid off!
  • Take a “financial inventory.” Could you still afford that Mercedes-Benz without your current salary? Or that all-inclusive vacation in Cozumel you’ve been thinking about booking? Preparing for a layoff doesn’t have to mean giving up the things you love — it just means planning realistically so you aren’t living too close to your financial edge.

In a worst-case scenario, you might also have to cut back on things that are tougher to change, like housing or vehicle expenses. Think about that ahead of time — do you have family members you could move in with? Could you share a vehicle with your partner?

Whatever your plan is, talk it over ahead of time with anyone who could be impacted. The last thing you need during an emergency is to count on help that might not be realistic.

3. Supplement your income

There’s no two ways around it — losing your job sucks. However, we’re living in the Golden Age of the Side Hustle! No matter your location, age, experience, and interests, you can almost certainly find something to supplement your income. 

Side gigs and other sources of income

Here’s the idea — no matter what your skills or interests are, find a way to start a side hustle today, and use it to begin paying off your debt and building your savings. It’s incredibly helpful to have an income stream outside your normal salary to use specifically for paying off debt — and it can help you stay afloat when that salary is no longer coming in. 

Unsure of where to start? The world is your oyster! 

Think about what you like doing, what skills you have, and what your time commitments are. If you have a car in good shape and you don’t mind having a chat with strangers, you can make decent wages driving for Uber or Lyft. If you’re an artist, you can sell your work online or find commissions around town. Do you have an idea for vintage fashion and spend tons of time in thrift stores? Reselling clothes can be lucrative, especially in an urban center. 

Having a side hustle is not only a great idea, but also it’s never been easier. If the side gig is a new business you’ve been wanting to launch, start now while you still have extra money! New businesses can take a minute to get off the ground — you don’t want to start one while you’re strapped for cash. 

You can also look into a classic part-time job, like working at a restaurant as a server or bartender, finding a gig at a retail spot, or working as a barista.

Unemployment benefits

If you’ve been laid off, you may qualify for unemployment benefits. Remember, unemployment is not charity — it’s public unemployment insurance that exists to help you get through tough times. Use it to supplement your post-layoff income. 

To find out if you’re eligible for unemployment insurance, check in with the unemployment benefits office in the state where you were working. They can help you determine your eligibility and provide you with the paperwork you need to complete your application. 

4. Stay ready, just in case!

One of the best things you can do to prepare for a layoff is to stay ready for the job hunt — so you can hit the ground running if you need to find a new full-time job!

In case you’ve already been laid off, we’ve included tips for catching up in a hurry:

  • Keep your interview wardrobe up to date. Ideally, you don’t want to shop for new outfits when you just lost your income. No matter if it’s in-person or on Zoom, you’ll want to look professional. If you need to freshen up your wardrobe cheaply, try visiting thrift shops in wealthier neighborhoods. You can often find professional clothing that looks almost new.
  • Keep your LinkedIn profile up to date too. Whenever you get a big win at work, add it to your LinkedIn profile. Job recruiters are extremely active on LinkedIn, so be sure to use the kinds of keywords they’ll be searching for when they want someone with your credentials. If you have to do this quickly, start with the highlights of your last few performance reviews.
  • Network, network, network. Relationships are incredibly important in life, and the business world is no different. Keep nurturing your network on a regular basis instead of waiting until you need help, and be sure to stay in touch with anyone who has been a true friend or trusted colleague. Need to meet people fast? Reach out to your closest friends as well as professional recruiters and let them know you’re looking.
  • Grow your career. Don’t be afraid to go after raises and promotions when you’ve earned them! Always look for opportunities to grow and continue in your professional development — going that extra mile can help you stand out in a sea of candidates. Plus, if you put some of that extra money toward your savings every month, you’ll be in far better shape to survive life’s rough patches.
  • Adhere to self-care. It’s normal to feel worried after a layoff. Be sure to check in with yourself, feel the emotions that you feel, and do things to take care of yourself. Eat well, meditate, exercise, and surround yourself with people or experiences that lift your spirits no matter what — from your favorite movies to your best friends.

Move forward with confidence

A layoff, while stressful, doesn’t mean that your way of life is in jeopardy. It’s a bummer, sure. But every year, thousands upon thousands of people survive layoffs and come out on top. 

The key is to start planning as early as you can. Take on some side hustles, work on cutting costs, stay on top of the job hunt, and move forward with confidence. You’ve got this.

Want to build that financial plan the easy way? Simplifi can help you review your monthly expenses, create a personalized spending plan, pay down your high-interest loans, and hit your savings goals — all in under five minutes a week.