Losing Your Job? A Financial Planner's 6 Steps to Survive and Thrive

It feels like we've seen more layoffs happening among clients at our financial planning firm in the past few quarters than we've seen in the last 10 years.

Companies cutting costs and shrinking workforces have been trends across tech and biotech lately, and layoffs are hitting other industries too.

Losing your job might feel like something you can't plan for or control. But a core tenet of financial planning is to expect the unexpected.

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Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

There are proactive steps you can take, as well as immediate action items to put on your list to better protect yourself in the event of a layoff, and to keep your financial plan on track.

Here's what we've been advising our clients who are dealing with a job loss.

1. Make a counteroffer on your severance package

You likely understand the power of negotiating the terms of a job offer — from pay or bonuses to benefits packages — when looking for a new job. But you can also end up in a better financial position by negotiating any potential severance packages, as well.

Just like negotiating compensation when considering a new job, you can negotiate the terms of your severance package. Such packages can include lump sum payments, equity grants and payouts of banked paid time off.

Benefits apply here, too: You could ask for support in the form of career coaching, reimbursement for training programs or placements with recruiters and other job-search specialists.

And like a job offer, your company should give you time to consider the severance package they present to you before you need to respond.

Take advantage of the time provided (while being mindful of any deadlines). Use it to consider your leverage points, which could include potential legal claims but may also be centered around the value you created as an employee.

Do any additional research to back up your counteroffers, and review company policies to make sure you understand what, if anything, your employer may owe you beyond what they initially offered.

This is an opportunity to walk away with a better deal, so don't ignore it.

2. Triage your monthly cash flow with an emergency budget

The loss of regular income is usually the biggest immediate financial impact of a layoff. To address this, you need to evaluate your cash flow and determine what can be cut from your budget immediately, vs what has to get paid no matter what.

For those no-matter-what items, this is the purpose your emergency reserves serve: a cash cushion to get you through unexpected pitfalls.

Building an emergency budget is a useful tool to keep handy and deploy when you need it. To create it, start with your existing budget or record of monthly cash flow and strip out or dramatically reduce discretionary spending. That's it! Very simple, although it's not easy to go through and choose what to eliminate.

Keep in mind that the idea here is to see what costs you can eliminate immediately to help you get through a period of unemployment. No, this is not fun. It's also temporary, and doing so will help your cash reserves last longer.

Ideally, your emergency budget is something you'd construct before a layoff. If you're worried about losing your job, this exercise can help ease some anxiety because it shows there are things within your control you can do to better your financial situation, even as you deal with a loss of income.

You know you have a backup blueprint that can guide your spending decisions while you get through a period of unemployment.

But this is also something you can do on the fly, if needed. If you need help working through it, your emergency budget should probably include:

What you have to pay for, regardless of your employment status. Think fixed costs and bills with no flexibility or ability to change, like your mortgage and utility bills.

Scaled-down line items for things you need, but also have control over how much you spend. This might be things like groceries, household shopping or even gas.

These things are more needs than wants — but you can start shopping at your local chain grocery store vs Whole Foods or be more judicious with long-distance trips.

One or two things that are extremely important to you, but don't qualify as needs. Even if you lose your income, some things that are technically "wants" vs needs are still extremely important to maintain.

This will look different for different people, but some examples might include a gym membership so you can maintain your workout routine, a monthly appointment with a therapist or a (smaller) budget for select self-care spending.

Everything else should be cut out or drastically reduced in your emergency budget. Remember, this isn't your new normal. It's just your guide to navigate through a temporary tough time.

3. Reconsider one-time purchases (for now)

On a similar note, if you're worried about a layoff or just lost your job, you need to take a second look at any upcoming one-time purchases you previously considered.

Avoid big-ticket purchases or delay as much choice spending as possible until you secure a new paying position. Hold off on any financial decisions that would insert large fixed costs into your monthly budget, as well.

Again, it's not forever. But you want to focus on what you can control to get through a potentially tight period, and pausing spending is a great way to successfully navigate a period of no or low income.

4. Know your health insurance options and apply for unemployment

COBRA may cover your health insurance needs in the event of a layoff. You may not know this until you actually receive a severance agreement/package, but you could get coverage this way for a period of time — typically 18 months.

Depending on your state, you may also be able to purchase your own private coverage on an exchange.

We're based in Massachusetts and can leverage the commonwealth's exchange. If your state does not offer this, HealthCare.gov may be a good place to start for researching other options.

We also generally recommend our clients apply for unemployment benefits as well. Again, specific terms of a layoff may affect when and how much you qualify for benefits.

5. Identify other benefit gaps

Most employed workers get health insurance through their employer, and that's typically what people think of losing when experiencing a layoff.

But your benefits package might have included other policies and types of coverage as well, like life and disability insurance or access to certain professional services.

In the event of a layoff (or ahead of a potential one if you're concerned), ask your employer if your group life and disability policies are portable — meaning, you could maintain the policy you have now even if you were laid off.

You may be able to keep the coverage; you'd just need to pay the premiums yourself, where previously your employer covered that cost.

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If your policies are not portable, you may want to speak with an independent insurance broker about private term life or long-term disability policies to cover any gaps.

This is a sound recommendation even if you feel confident in your current job security! Most employer-sponsored plans don't quite cover the full needs of higher-income earners.

6. Reach out to your financial planner

Providing a clear set of steps to take now to navigate through a challenging time is exactly what a real financial planner is made to do. Keep them in the loop and lean on their expertise.

A great planner will help make sure you understand the best steps to take, provide support and resources (including helping you sort through new job offers when those start coming in) and take care of the technical aspects of your planning so you can focus on what comes next in your career.

Related Content

• Five Financial Tips to Help You Plan for the Unexpected
• Facing a Layoff? Ask Your Employer These Questions Now
• I Got Laid Off at 59 with an $800,000 401(k). What Are My Options?
• Six Winning Moves to Land a Job After 50