What To Do When You Get Laid Off

What To Do When You Get Laid Off
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Getting laid off is never fun. As someone who has experienced this three times, it can be disorienting. Your self-esteem may take a hit when your employer decides it’s time to part ways.

You are also not alone. According to the most recent data, 212,000 people filed for unemployment in September 2019, which is the lowest number in more than 30 years.

Before you start the pity party, it’s important to know what to do when you get laid off. Let’s look at your best course of action, from networking to cutting expenses, and how you can use this time to come out ahead financially.

What Is A Layoff?

Here is what a layoff is: it’s a sign that the company you worked for made poor projections in terms of revenue or compensation expenses.

Here is what a layoff is not: a reflection of your worth as a person or as an employee. Companies lay off personnel to reduce expenses and liability or if they are changing direction.

This differs from being fired. If you lost your job because of misconduct, it was due to something you did, not because of something the company did.

What To Do When You Get Laid Off

Let’s be honest, getting laid off sucks. You may feel lost, angry, or sad about losing your job. Many people consider their job part of their identity, so losing their job can cause unexpected feelings to bubble up to the surface.

Before you make any rash decisions, it’s important to step back and assess the situation. What should you do next? What makes the most sense from a financial perspective?

Here is a list of ideas of what to do when you get laid off.

Talk To HR And Get Everything In Writing

As soon as you learn you’re losing your job, you need to figure out your situation. Are you being fired because of misconduct? Or did the company have to cut personnel expenses so they eliminated your position?

If you are part of a mass layoff, it may be easy to figure out which camp you fall into. However, it’s always best to get a direct answer from your manager or Human Resources before signing anything.

In fact, don’t feel pressured to sign anything on the spot. Make sure you review every piece of paper they give you. Read everything before signing. It’s OK to ask for time to review it and even involve an attorney.

While you are talking to HR, ask for clarity on the severance pay policy and on receiving your final paycheck. Every cent is important in the upcoming days when you feel the loss in income.

Ask questions about your retirement account and other company benefits. Leave nothing to chance, even if you think you know the answer. Get as much of this information in writing as you can in case you run into any issues later on.

Get Important Stuff Off Your Computer

Before walking out that door, retrieve all important information such as contacts from your computer. Make sure what you’re downloading is not proprietary company information or trade secrets.

Having these contacts will be invaluable when you start your search for another position. Once the dust settles, reach out to select people on your list. Inform them of what happened and that you are moving onto a new position.

If applicable, take a few samples of your work. Talk to your boss about what is appropriate to take to use as examples in future job interviews.

While you’re at your desk, pack up your belongings, including picture frames and equipment you’ve brought from home. If you have any company equipment such as a phone or laptop, return it to your boss.

Apply For Unemployment

You can collect unemployment if you’ve lost your job through no fault of your own, including a layoff. However, if you voluntarily quit or were terminated for misconduct, you can’t collect unemployment income.

Every state has its own requirements for qualifying to collect unemployment. You will have to provide details such as how long you were at your position and your compensation.

The state will also verify the amount your employer paid into the state’s unemployment insurance fund. Note that the amount you receive from unemployment benefits will be less than your previous compensation.

States usually have a tiered system for paying out benefits based on your salary when you were laid off. Benefits are also capped so if you earned a salary over that threshold, you won’t receive more money.

If you qualify for benefits, you may need to look for a job and show proof of your search. States often track this by requiring those on unemployment to log their job applications for each week they receive benefits.

Related: How To Get Any Job

Cut Back On Expenses And Savings

The sudden drop in income can be hard. When you find yourself unemployed, your first order of business is to cut back wherever you can.

This means pausing any contributions to savings or retirement accounts, children’s college funds, and your emergency fund. Keep in mind these cuts are temporary so foregoing a few months of contributions shouldn’t make a big difference.

Next, you need to review all expenses and reduce or eliminate as many as you can. This includes canceling cable, foregoing luxuries like manicures or salon hair cuts, music streaming, and book subscriptions.

Instead, use your local library to check out books, music, and movies for free. Do your own manicures and figure out how to stretch the time between hair appointments.

Look for free events in your area. Take advantage of discounts that are offered while most people are at work. For example, many museums have a free admission day every month, which can often be on a weekday.

Related: 10 Things You Can Get For Free At The Library

Do Nothing

Many people who lose their jobs feel they need to look for another position immediately. I experienced this with my layoffs, applying for anything I could find the next day. Looking back, I wish I had taken a break.

It’s important to take time and decompress. Losing your job through a layoff is stressful. Combine that with hustling at your job for the last few years while hardly taking a break. Use this time off from a job to take a breather.

Taking time off can also help you figure out where you want to go and what you want to do next in your career. Ask yourself if you would like to find another position similar to the one you left. Or maybe you would like a similar role in a new industry?

This can be a great opportunity to chase dream you had put aside such as switching careers or even going back to school. Ask yourself the hard questions to determine what you want to do with your life rather than just going with the flow.

Related: Creating Your Dream Job

Wait To Dip Into Savings

Having a fat savings account can be comforting when you face a long stretch of unemployment. While having the money is nice, think twice before dipping into your account right away. The longer you can put off using the funds, the better off you’ll be.

Instead, try to cut back your expenses as much as possible and live on your unemployment benefits and any severance pay. Only dip into your savings as a last resort if you can’t find another way to pay for something.

That’s because you never know how long you will be unemployed. It may only take you a couple of months to find a new position and have a steady stream of income once again. Alternatively, you may find yourself unemployed for six or nine months and you may need to make your money stretch.

Start A Side Hustle

If you find yourself unemployed, it can be a great time to build a side hustle to have extra income coming in. Working a full-time job can make it more difficult to earn money on the side but now, without the pressure of full-time hours, you can focus on your side gig.

The first few months of a new business or side hustle are often the most time-intensive so use your extra time during your layoff to get it off the ground. Once you start a new job, you will have an established side hustle, making it easier to keep earning extra money.

Keep in mind that the money you earn from a side hustle can reduce your unemployment benefits. However, the long-term benefits of a side hustle can outweigh getting less in benefits over the short term.

Related: 6 Types Of Side Hustles You Can Start Today

Network

Over the upcoming weeks and months, reach out to former co-workers and colleagues to let them know you’re looking for a new position. Join networking groups in your area to expand your circle. You never know what opportunities might arise.

Most jobs I’ve had in my career have been as a direct or indirect result of networking. It’s important to stay in touch with other people in your industry and people you’ve worked with in previous jobs.

How A Layoff Set Us On The Path To FI

When I graduated from college, I had $26,000 in student loan debt and more than $4,000 in credit card debt. Having to move back home and ask my parents for help with my bills was a huge wake-up call to get my finances in order.

The second turning point was getting laid off from my first full-time job after college. While I quickly found another position, I was laid off six short months after starting. My husband and I had recently gotten married, combining our incomes.

Going through back-to-back layoffs showed us how quickly you can lose your financial footing. Since we never knew if one of us would be laid off, we lived on one income and saved the other.

Fortunately, our expenses were low and we opted out of larger purchases unless we could afford them on one income. We drove older cars, bought a smaller house, and limited our spending to half our earnings.

When we discovered the FI movement a few years later, we were already on the right path without realizing what we were doing. Even though I was laid off three times in four years, I always found another job so we were never without my income for long.

Stashing one salary away every month helped us pay off our mortgage in five years and pay off two cars in less than a year each. It also allowed my husband and me to start our own businesses and opt out of corporate America.

The Bottom Line

Experiencing a layoff can be a great test of how much you need to be happy. It’s an opportunity to reduce your expenses and only spend on what brings you value. It can also help you test-drive living on one income if you’re part of a two-income household.

Use this as an opportunity to reset your financial spending and decide what’s important to you. It’s a rare opportunity to take a step back and evaluate how you spend your time and money. This can take you one step closer on your path to financial independence.

Have you been laid off on your path toward financial independence? How did it affect your finances? Share in the comments or in the ChooseFI Facebook group.

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What To Do When You Get Laid Off

ChooseFI has partnered with CardRatings for our coverage of credit card products. ChooseFI and CardRatings may receive a commission from card issuers.
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1 thought on “What To Do When You Get Laid Off”

  1. I was laid off on Monday. This was a timely article that helped me with actionable steps and to manage the self esteem hit associated with my lay-off.

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