How To Financially Prepare For A Layoff

By Jay Kirkwood, Forbes Councils Member, Forbes Finance Council

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Jay is the Founder of Secure Financial Management, headquartered in San Antonio, Texas. He is a Certified Financial Planner™.

Over the past 18 months, our firm has seen not just an increase in clients who have been laid off but more meetings than ever with those concerned about the increasingly unstable job market and whether they may lose their job next.

Being financially prepared for unexpected setbacks, such as a layoff, is important. While losing a job can be distressing, having a solid financial plan can help alleviate stress and uncertainty. Here are some key strategies to ensure you are financially prepared if you face a layoff.

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Build An Emergency Fund, And Cut Your Spending

Having an emergency fund can ease your stress during a layoff. Plan to save three to six months’ living expenses, including rent/mortgage, utilities, groceries and debt payments. A financial safety net can cover essential costs and bridge the gap until you secure new employment.

Look closely at your monthly spending and see where to cut costs, such as unnecessary shopping. Like eating out? So does the rest of America. It’s not uncommon, when we go through budgeting exercises with clients, to see them spending five figures per year on eating out. That might sound shocking, but getting there doesn’t take much. Spending a little over $27 daily on dining results in spending almost $10,000 in just one year. This is an easy area to save on that is completely under your control.

Other areas: Negotiate lower rates on bills such as internet and insurance. Consider downsizing or refinancing your home or car to reduce monthly payments. Every dollar saved will contribute to your emergency fund and provide a buffer during unemployment.

Adjust Your Insurance Coverage

Evaluate your insurance policies to ensure they adequately protect you during a layoff. Review your health insurance coverage, and understand the options available if you lose employer-sponsored benefits. Consider adding supplemental insurance such as disability or critical illness coverage to provide additional protection. Assess your life insurance policy to ensure it adequately covers your family’s financial needs. Adjusting your coverage in advance can help you maintain financial stability during challenging times.

Diversify Your Income Streams

Consider diversifying your income by exploring side hustles or freelance opportunities. Develop skills or hobbies that can generate additional income when needed. Online platforms and gig economy apps offer flexible work arrangements that can supplement your finances. Having multiple income streams can cushion the impact of a layoff and maintain financial stability while seeking new employment.

Invest time and effort in building your personal brand and network to increase your chances of securing side gigs. Building a personal brand doesn’t have to be a complicated project. The real goal is to ensure others in the marketplace know your skill set and your specialization.

The most successful way we have seen clients do this? By sharing how their skills are valuable with real-world examples. Did you recently complete a big work project? Pat yourself on the back via LinkedIn and start building your brand by sharing your achievements with others.

Reduce High-Interest Debt

Focus on paying off high-interest debts such as credit cards or personal loans. High-interest debts impact cash flow and hinder your ability to stay above water during a layoff. Craft a debt repayment plan, allocating extra funds to pay these obligations. Consider debt consolidation options, or negotiate with creditors for lower interest rates or payment plans. Reducing your debt burden will give you more financial freedom and flexibility overall, not just during a time of unemployment.

Keep Up With Job Market Trends

Keep yourself updated with industry trends and job market developments. Networking, attending industry events and engaging with professional communities will give you insights into potential opportunities. To remain competitive, enhance your skills through online courses, certifications or workshops. You can position yourself for a successful job search by staying informed and proactive.

Seek Professional Financial Help

A certified financial planner can provide an objective view of your current situation. Without an outside party giving you feedback, it is easy to rationalize and overlook problems that must be addressed. Someone emotionally disconnected from your economic life can give you a reality check on overspending and living beyond your means.

How else can a financial professional help you? By lending an ear. It might sound funny, but often when we meet with someone going through a layoff (or who is concerned one may be coming for them), the first half or more of the meeting is not numbers, charts and graphs. It’s talking, allowing them to unburden themselves of all their concerns and fears, and us sharing the facts with them. We have seen hundreds of individuals dealing with what they are going through and know what they need to hear in this situation.

And while it’s initially scary to be laid off, most of the people we’ve helped recover from this circumstance tell us that being laid off was one of the best things that ever happened to them. Most find themselves in a new role they enjoy more, often with higher pay and benefits—a position they would never have pursued had they not been given a “push.”

Preparing yourself financially for a layoff is a proactive step toward safeguarding your future. Incorporating these strategies can empower you to navigate the challenges of unemployment with greater financial stability and resilience. Remember, preparation today can pave the way for a brighter tomorrow.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?

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Jay Kirkwood

Jay is the Founder of Secure Financial Management, headquartered in San Antonio, Texas. He is a Certified Financial Planner™. Read Jay Kirkwood’s full executive profile here.