Preparing Your Budget For A Layoff
3-Minute ReadMay 20, 2022
Being let go from your job isn’t exactly the best news you want to hear, but during times of economic uncertainty, companies may decide to do a round of layoffs. If your company has already started doing this or you're convinced it might happen soon, then it’s natural to feel scared.
If you’re concerned you may not have a job soon, you can take some steps today to take care of your finances. Take a look at our list below of financial moves to make when preparing for a layoff.
Look At Your Spending Habits
It’s hard to know how much you need to survive without knowing how much you spend. That’s why it’s a good idea to track it now to see where your money is going.
Grab all your financial statements such as those from your bank, your credit cards and your monthly bills to see what you’re spending. Pay attention to your variable expenses such as how much you spend on entertainment, food and transportation to figure out a plan if you do lose your job.
Create A Bare-Bones Budget
Creating a “just in case” budget is helpful for when times get tough so you know exactly what you need to spend to survive. When you don’t have money coming in, you’ll need to focus on just the necessities such as housing, transportation, food and other basics like cleaning supplies.
Here’s where tracking your spending comes in: you can use this as a benchmark to see where you can cut back on expenses. Be as ruthless as possible as this bare-bones budget is only temporary until you get back on your feet. For example, can you cut back on premium cable and watch local channels? Or stop eating out and cook all your own meals instead?
Stuff Your Savings Account
Cutting back also has another benefit: adding more money to your savings account. If you know you’ll be without a job soon, then it’s a good idea to set aside money now so you can still pay the bills.
You may already have an emergency fund for times like these, but it doesn’t hurt to add to what you have. And if you don’t have one, start one now.
No amount is too small to start when learning how to create an emergency fund (that $25 a month you’ve cut from your cable bill can work). Or see if you can give up some luxuries so you can put that money into savings. Perhaps you got a tax refund or some cash from a relative. That can go directly into your emergency fund as well.
As for how much you should aim to save, start with at least $1,000, then work toward a few months’ worth of expenses in your bare-bones budget.
Call Your Creditors
It’s better to do your research now in case you can’t afford to pay your creditors, so you know what your rights are. Many lenders and utility companies have hardship assistance programs and you may be able to delay your payments or waive late fees. You may even be able to negotiate payments (such as making partial ones) but that’s typically done on a case-by-case basis.
When calling, ask about any programs in the event you’re laid off and can’t find work. Customer service should be able to provide you with relevant information.
Research Unemployment Benefits
There’s no shame in having to utilize assistance programs during your time of need. Unemployment or other government assistance programs may vary from state to state, so see what you need to do to apply for it just in case. You’ll also want to know how long it might take until benefits kick in (and for how long) so you can feel prepared.
Negotiate A Severance Package
During layoffs, employers usually offer some sort of severance package. Learn how that works – even if your employer legally isn’t obligated to provide one, it’s still a good idea to ask what their policy is.
For example, you may be able to negotiate severance pay or stay on your current health insurance coverage for a specified amount of time. Either way, take advantage of all the benefits your job offers now in case you lose them. You’ll also want to find out how your benefits will be affected once you’re no longer employed and you’re not receiving severance.
Find Income From A Side Hustle
If you can’t cut back and beef up your emergency fund and you're finding it really hard to pay for necessities, consider bringing in some income using a side hustle. There are part-time work or side hustle opportunities in various industries – many pay a decent hourly wage.
As for where to look, you can ask friends and colleagues, check online job boards, or advertise your services around the neighborhood. Right now, your main job is to look for as much income as you can to see you through the leaner times. Who knows, maybe your side hustle will bring in as much money as your regular job, helping you with paying your bills and reaching other financial goals.
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