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By Anne Purcell
Layoffs have become increasingly common, with major companies laying off thousands of employees simultaneously. Unlike quitting, or getting fired due to poor performance or violating company policy, getting laid off can have nothing to do with your overall performance. Companies can lay off their employees for many reasons, such as cutting costs, outsourcing projects, reducing staff, etc. However, even if getting laid off has nothing to do with you, it can still cause distressing emotions and fears, specifically surrounding your finances.
In the current economic climate, it takes 3-6 months on average for someone to find a new job. Depending on your financial state, it is best to understand all your options—such as your severance package, emergency funds or savings—so that you can lessen your stress over how you'll stay afloat for the time being and start your job search feeling comfortable and positive.
To get started, here are five steps you can take if you found yourself recently laid off:
While severance packages aren't guaranteed, most companies will offer some type of package when laying off their employees. Severance packages are usually based on how long the company has employed you and can include a pay-out for unused sick or vacation days. You'll either receive this payment as a lump sum or in installments. Understanding this process will be helpful when setting your budget while searching for a new position or applying for unemployment.
While the overall pay will most likely be non-negotiable, other parts of the contract may be. Before signing off on the package, negotiate for other benefits you had at the company—such as health care, health insurance premiums and your 401k. For example, if you are laid off while your company's 401k match is considered unvested, bring that up in negotiations to try and keep your unvested shares of your retirement plan.
Depending on your state you may still qualify for unemployment, or partial unemployment, even if you receive a severance package. How unemployment works is that you will receive a portion of your wages for so many months as you look for new employment. It is necessary to contact your state's unemployment-insurance program as soon as possible. This is because unemployment bases your benefits on your most recent earnings, and that number might change if you wait. Further, some states require you to be unemployed for a specific amount of time, such as a week, before collecting benefits. Applying early will give you a better chance of receiving your aid on time.
Even if you are unsure you can collect unemployment benefits, applying anyway is still a good idea. Before the Covid-19 pandemic, it is estimated that three-quarters of those unemployed who would qualify for unemployment never applied for their benefits. These benefits are there to help you, so apply even if you don't think you will be eligible—you never know.
An emergency fund is a way to prepare yourself for unplanned expenses or financial emergencies, such as a layoff. While the exact amount necessary to have in an emergency fund will vary from person to person, it should generally have enough to cover three to six months of basic living expenses. Here is an easy tool through NerdWallet that can help you estimate how much you might need in an emergency fund, considering various necessities.
If you don't have a specific emergency fund in place and are laid off, evaluate your savings to see how that might fit into your new budget. This is also an excellent time to assess your savings account and whether your money is receiving the best rate possible. Check out Alliant's high-rate savings accounts to earn more interest on your money.
After knowing the ins and outs of your severance package, applying for unemployment, and seeing how much you have stored in your emergency fund or savings, it is time to start creating a new budget. By outlining all necessary expenses, including but not limited to food, rent/mortgage, health insurance, utilities and miscellaneous loans/debts such as college or car loans, you can better gauge what you need month by month while job searching. Doing this early can help give you peace of mind that you will be okay while out of a job.
Getting laid off from a job can bring many emotions. Instead of going into panic mode, take a deep breath and remember that getting laid off has nothing to do with your skillset and, instead, is more of a reflection of what is happening within the company. If you can take some time off to reflect on your previous role and what you want from your next, do it. If not, here are some steps to start job hunting efficiently:
Update your resume and LinkedIn profile: Depending on how long you've been at the job you've been laid off from, your resume might be dusty. Looking it over and updating it with new experiences and skills early will help prepare you for your job search.
Getting laid off and job hunting can get discouraging. By knowing where you are financially and creating realistic budgets based on your severance package, emergency saving funds and savings accounts, you can take a little stress out of the whole thing. Right now, getting laid off might seem like the worst thing that could happen, but exciting new opportunities may be right around the corner.
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