I was laid off last year. I honestly had it a lot better than some people I know. I got about 9 months advance notice and ended up getting about 5 months of severance. I am well aware that cases like mine are few and far between. That said, there are things you can do to help you survive a layoff, should it happen to you.
If you are fortunate enough to get advance notice, I suggest taking these steps as soon as you find out about the layoff. The sooner you get started, the better positioned you are going to be financially to handle it.
1. Cut expenses like crazy
If you are getting laid off, it is time to be ruthless and cut anything other than things you absolutely need. I wrote about 15 ways to cut expenses, but you have to cut the fat. It would be a terrible thing to get a few months down the road and realize that you can’t pay your electric bill because you couldn’t break your daily Starbucks habit.
If there are any small debts you can pay off quickly, it may be worth it to pay them off to eliminate the expense each month. For anything other than small debts, I suggest…
2. Start paying the minimum on your debts
Take the money that you used to be paying above the minimum payment and start building up your emergency fund.
3. Calculate your bare minimum monthly income
This part is very important. Start by downloading a free budget spreadsheet. You have to find out how much money you need each month to survive. After cutting your expenses, this number should be a lot lower than your current monthly income. If it isn’t you need to go back and cut more! The goal here is to figure out your bare minimum income that you need while in “survival mode.” and figure out the minimum that you can live on each month.
4. Start filling your emergency fund any way you can
5. Start looking for a job immediately
The first benefit here it is a lot easier to survive a layoff when you know that you have a job lined up. The sooner you start looking for a job, the sooner you will find something.
The second benefit is that you will likely have more competition as time goes on. In my case, I worked in an industry that only had a few major employers in my city. So everyone who got laid off at my firm was calling the few other firms in town. Some people started looking for a job right away, and some people took their time and called just before their job-end date. As you could imagine, most of the jobs had already been filled.
6. Ask your friends
I know an accountant who sent out an email to everyone he knew explaining that he had gotten laid off and what type of of job he was looking for. He ended up getting referred to a job by one of his friends. He then rewarded the referrer by taking his family out to a luxury restaurant. Not a bad idea.
7. Don’t burn any bridges
It isn’t uncommon to feel some animosity, but burning bridges is never a good idea. I noticed that many people in my department had previously worked at the same company together. At the previous company they worked in different departments and different roles, but they all ended up working together. You never know when you might run into people again.
8. Don’t spend your severance check!
I was blown away to hear one of my co-workers say that he had already spent his severance check – months before his job-end date and without another job lined up! As soon as he found out how much his check was going to be for he went out and bought a car and a swimming pool or something on credit. I mean seriously, there must be 50 reasons why that is a terrible idea.
Instead, when you get the check, stash it in a high-interest savings account. I like ING Direct for a lot of reasons, but you may be able to find a higher rate elsewhere.
9. Figure out how long your severance will last
After completing #1 you should hopefully be able to make your severance last longer. Once you figure out the bare minimum (#3) that you can live on each month, add your severance and emergency savings and divide it by your bare minimum number. This will tell you how many months you can last without additional income. This gives you a concrete date of when you have to find a job by.
10. Consider taking a job that pays less
This is a tough one. Some people don’t want to sacrifice income, so they will stay in the job hunt without any income for a year or more waiting until they get the pay they want. Personally, I subscribe to the theory that you should get anything just to keep money coming in. Preferably something that will allow you to continue your job search.
In my case, after doing #9, I realized that my severance and emergency fund would last twice as long if I had some part-time income coming in. So if your severance and emergency fund would last 9 months, you may be able to increase it to 15 months just by working part-time at Starbucks during your job search. This essentially gives you 6 more months to find a job that pays what you want.
Side note: Last I heard Starbucks offers health insurance to part-time workers (20-hours per week)
Summing it up
These are a bunch of practical things to do when dealing with a layoff, but the most important is to seek God and His wisdom. Wisdom is one of those things that He promises to give when we ask. Be diligent to do your part, but keep trusting Him and stay encouraged!