By Pat Brown, MBA
Being laid off is one of life’s more stressful events, and it often brings with it a host of financial challenges. Whether you’re dealing with immediate expenses or trying to figure out how to navigate a longer period of unemployment, managing your finances carefully is crucial. While you may be feeling uncertain, with the right strategies in place, you can weather the financial storm and come out the other side stronger.
Here’s a guide to help you handle financial setbacks after a layoff, keeping your financial well-being intact and helping you move forward.
1. Assess Your Immediate Financial Situation
The first thing you need to do when you’re laid off is to understand exactly where you stand financially. Take a hard look at your savings, outstanding debts, and monthly expenses. Knowing your current situation will help you create a plan and avoid unnecessary panic.
Action Step:
✔ Create a budget—track your monthly income and expenses, noting areas where you can cut back.
✔ Evaluate savings—determine how much emergency savings you have and how long it will last based on your current spending habits.
✔ List your debts—note all debts and bills that need to be paid during this period, such as rent/mortgage, credit card payments, and utilities.
Why It Helps: Understanding your financial situation gives you clarity and helps you make informed decisions about where to cut costs, what to prioritize, and how to use your resources effectively.
2. Apply for Unemployment Benefits
In many cases, unemployment benefits can help provide a temporary financial cushion while you’re looking for new employment. Even if you’re unsure about your eligibility, it’s important to apply for unemployment benefits as soon as possible to avoid delays.
Action Step:
✔ Check eligibility—research your state’s unemployment requirements to ensure you qualify.
✔ File for unemployment—apply immediately to start receiving benefits as quickly as possible.
✔ Track your benefits—ensure you know how much you’ll receive weekly and how long those benefits will last.
Why It Helps: Unemployment benefits can be a lifeline, helping to cover basic living expenses and allowing you to focus on finding a new job rather than worrying about immediate financial concerns.
3. Cut Non-Essential Expenses
During times of financial uncertainty, it’s essential to reduce your spending. Take a closer look at your discretionary expenses—those things that aren’t strictly necessary—and find ways to minimize or eliminate them temporarily.
Action Step:
✔ Cancel subscriptions—pause or cancel memberships like streaming services, gym memberships, or other recurring expenses.
✔ Limit dining out—cut back on restaurants, takeout, and coffee shops.
✔ Review major purchases—avoid buying big-ticket items like electronics, furniture, or vacations unless absolutely necessary.
Why It Helps: Reducing non-essential expenses can significantly stretch your savings and give you more breathing room as you look for new work.
4. Tap into Emergency Savings
If you’ve built up an emergency savings fund, now is the time to use it. A well-maintained emergency fund is designed to help you through situations like a layoff. The goal is to keep your essential living expenses covered while you search for a new job.
Action Step:
✔ Use savings strategically—draw from your emergency fund to cover necessary expenses like rent, utilities, food, and insurance premiums.
✔ Preserve long-term savings—try not to dip into long-term savings like retirement accounts unless absolutely necessary to avoid long-term financial damage.
Why It Helps: Your emergency savings can give you the breathing room to focus on your job search without the stress of worrying about paying bills every month.
5. Consider Freelancing or Part-Time Work
While you’re job hunting, freelancing or part-time work can help supplement your income and ease the financial strain. Gig jobs, freelance opportunities, and temporary positions can provide flexible ways to earn money and keep you engaged in work.
Action Step:
✔ Explore gig economy jobs—consider freelance work in your area of expertise, or sign up for platforms like Upwork, Fiverr, or TaskRabbit.
✔ Look for part-time opportunities—even part-time roles can help bring in additional cash and might even lead to full-time offers.
Why It Helps: Freelancing and part-time work offer a safety net that can help bridge the income gap while you search for a full-time position.
6. Review Your Debt Obligations
If you have outstanding debts, it’s crucial to stay on top of your payments, but you may need to adjust your strategy depending on your current financial situation. Speak to creditors about deferment or payment options if necessary.
Action Step:
✔ Prioritize debt—make minimum payments on your debts and focus on those with the highest interest rates first.
✔ Request forbearance—contact creditors to discuss deferring payments on loans or credit cards until your employment situation improves.
✔ Consolidate debt—if you have multiple debts, explore options for consolidating them to reduce the interest rates or simplify payments.
Why It Helps: Managing debt during a layoff helps you avoid late fees, penalties, and interest charges that can exacerbate your financial situation.
7. Sell Unused Assets
Consider liquidating unused or unnecessary assets to raise funds quickly. This can include selling items like electronics, furniture, or vehicles that are taking up space and aren’t necessary for your daily life.
Action Step:
✔ Assess valuable items—look through your home for items that are worth selling, such as high-end electronics, jewelry, or collectibles.
✔ Use online platforms—sell items through platforms like eBay, Facebook Marketplace, or Craigslist to get cash quickly.
Why It Helps: Selling unused assets gives you immediate cash that can help cover urgent expenses while you focus on finding your next job.
8. Seek Financial Counseling
If you’re struggling to manage your finances after a layoff, you may benefit from speaking to a financial counselor. Many organizations offer free or low-cost financial advice to help you navigate tough times.
Action Step:
✔ Find financial counseling services—look for nonprofit organizations or financial advisors who specialize in helping people through unemployment or other financial challenges.
✔ Get budgeting assistance—a financial counselor can help you create a budget and offer strategies for managing your money effectively during a period of unemployment.
Why It Helps: Financial counseling provides professional guidance that can help you make smart decisions about your money during a difficult time.
9. Stay Positive and Take Action
While financial setbacks from a layoff can feel overwhelming, maintaining a positive mindset is essential. Stressing over finances can prevent you from taking productive action. Focus on proactive steps, such as refining your resume, networking, or applying for jobs, while also managing your money.
Action Step:
✔ Set small goals—make a list of daily or weekly actions that can move you closer to finding a new job.
✔ Stay positive—focus on the opportunities ahead, and stay motivated by reminding yourself that this setback is temporary.
Why It Helps: A positive attitude will help you stay focused on your long-term goals and prevent financial stress from preventing you from moving forward.
Conclusion
Dealing with financial setbacks from a layoff requires a proactive approach. By assessing your current financial situation, cutting unnecessary expenses, utilizing your emergency fund, and exploring supplemental income options, you can navigate this challenging time more effectively. If needed, seek professional advice to ensure that you’re managing your finances in the best way possible. The key is to stay focused on your goals, maintain a positive outlook, and take action to protect your financial well-being while you search for new opportunities.
Pat Brown, MBA is an experienced financial coach and advisor. He helps individuals and families navigate financial challenges, offering guidance on budgeting, saving, and financial planning through difficult transitions.
