What to Do If You're Laid Off

Smart Money has some suggestions on what to do if you're laid off. They list them as do's and don'ts as follows:

DO...

• Negotiate -- Many employers offer laid-off employees severance packages. The good news: Employees, especially those who've been at the company for many years and have a stellar service record, can often negotiate a better deal. Try to cash in unused vacation days.

• File for unemployment benefits promptly.

• Assess health-insurance options -- If you can't join your spouse's employer-sponsored health plan, consider either extending your previous coverage through COBRA or buying an individual policy.

DON'T...

• Tap into your 401(k) -- Tapping into the retirement account should always be your last resort, says Brown.

• Rely heavily on a HELOC -- Thinking about getting a new home equity line of credit to help get you through the dry spell? Think again.

• Overuse your credit cards -- Interest rates alone should be enough to keep people from using their credit cards too much. If you're desperate for cash, take money out of a standard savings account or taxable investment account, such as a stock portfolio, before turning to your credit cards or 401(k), says Toal.

Personally, here's what I would do (and would recommend for others) if I was laid off:

• My first line of defense would be my severance (assuming I got one). We could make this last probably 2-3 times as long as the period for which the severance was received (for instance, if I received two-month's pay, we could probably make it last 4-6 months) because: 1) I make a good amount since I've focused on developing my career, 2) we already spend significantly less than we earn, and 3) we could cut back further, postpone purchases, etc.

• After that, our emergency fund would kick in. We have six month's living expenses saved, so between this and the severance, we're already looking at close to a year being covered.

• I'd immediately ramp up side-income opportunities and additional ways to make more money. As many of you know, I've done a lot of freelance writing in the past and I could do more if need be. I could also start a few other low-cost ideas to bring in a bit. I could also supplement these efforts by using income from investments.

• I'd start to network and look for a job asap. One advantage of having a good career is that, if I had to, I could get a job making significantly less but it would still be a decent amount of money. Not that I'd take the first low-paying job that came along or that I'd even be looking to move down, but it's an option.

• I would likely consider becoming self-employed and/or combining a few ideas together to make a good income.

• My main concern would be to find affordable health insurance. This would play a major part in any decision I'd make.

How about you? What would you do if you were laid off?

Comments

[rdub98]

After I stopped crying, I would get out of the fetal position, pull my thumb out of my mouth, and do all of the above with more of an emphasis on the self-employment thing.

I could get on my wife's insurance, so I'm covered there. I don't have a big buffer for monthly expenses, but I'm getting there, so I would hit the ground running when it comes to bringing in an income, even if it is part time work.

[Rod Ferguson]

I also make a good wage and could stretch a two-month severance into 4 months, assuming my wife didn't lose her brand-spanky new job at the same time. Then we'd dip into our emergency fund (3 months of net) that I could stretch into 4-5 months. That gives me about 8-9 months of buffer; we live in a high cost of living area, so our income to overhead is narrower than yours FMF.

I'm a Veteran and my wife has health coverage, so I'm covered two ways. Losing my job for me at this stage might be the catalyst I need to make a try at self-employment; I'm not getting any younger and unless I decide to become an entrepreneur in my retirement, I'm probably never going to own my own business. If I would decide against (i.e. - bad economy not condusive to new enterprise, or all areas that I could excel in are overweighted) that means networking and job hunting. I could take a job at a smaller company for less pay (for the same reasons as you, FMF) as long as the position was a challenge, although I'd probably move back "up". I'm currently in a "lower" position than I have been historically because the pay was just too good; I've always said I'll mow lawns for a living if I can make six figures doing it. Being the sole breadwinner to a PhD student factored into that decision to step-down-for-better-pay heavily ;).

[thad]

"DO.... Try to cash in unused vacation days..."

I could be wrong, but I think you will always get paid for any un-used vacation days. Not so for sick days, though.

I haven't dealt with it when being laid off, but when I quit my last job to relocate, I got a large lump-sum check corresponding to saved up vacation.

[Mike Hunt]

I was laid off as of the beginning of May. I spent a lot of time negotiating the package (my employer gave me a cash amount in lieu of outplacement and relocation back to my home town) in addition to the settlement. I've gone into reduced spend mode although my expenses were very low to begin with. Now I'm devoting all my time to find another job and look at consulting. I expect this to take a long time following the old adage of looking for 1 month for every $20k of yearly salary.

Wish me luck.

-Mike

[Kevin]

I was laid off about 5 years ago and it turns out it was probably the best thing to happen to me, career-wise. I was planning on quitting that job anyway as the office was losing clients and staff...you would have to be a moron to not have seen the ship was sinking. Anyway, at the time my ex-wife made pretty good money, so we lived off her income.

We were in the process of divorcing though, so we sold our house and I lived off unemployment and some of that money until I found a job 3 months later. I did have to move back in with the parents for a few weeks after the house sold and before I got a new apartment, but it was OK. I actually used the leftover house money to payoff 1 of 2 credit cards to kick-start my "new life".

If I was laid off now, it would hurt, but we could pay most of our bills with my wife's income and unemployment. I doubt we'd have to dip into saving that dramatically but even if we did, we have at least a year's worth of expenses saved. Of course, we'd have to wait until I was employed again to move to a new house, but that's not that terrible. Health insurance would be an issue since I get it through work, but if necessary we could get it at my wife's job if she went back full time.

[Rod Ferguson]

Mike - what profession and geographical area?

[guinness416]

I don't understand "try to cash in vacation says". Don't you automatically get paid for any you've accrued? If not, that's a further argument if one were needed for making sure you use every last vacation day you've negotiated, every year.

[Scott]

I would immediately start contacting my friends and old co-workers and try and land an interview at another firm. It might be tempting to take a few days off and go on vacation. If I were single, without kids, I might have thought that way :)

[Mike Hunt]

Rod,

I've been running a business unit in Thailand - it's manufacturing, R&D and supply facility with about a $40 million turnover. I came out here on assignment from the East coast of the US.

-Mike

[Jacob Stabl]

I was also just laid off beginning of July... I saw it coming since pay checks were not coming for prior 2 weeks. I worked for a small software/consulting company that literally ran out of money so I didn't get much in the way of severance or anything else. I immediately applied for unemployment and still waiting on all that to go through. I also started looking for a job the week my first paycheck wasn't in the mail.
I have a really good computer engineer background so jobs are not as hard to apply for and I've had 3 interviews. The hardest part is going to be if one of them offers me a job and low-balls me then by law if I refuse then unemployment benefits are gone. Lucky for me my wife has a job and we can live off her salary and benefit if need be.
It is still fairly unsettling to have a job one day and not the next. I dropped the unnecessary bills such as data plan on cell, extra cable channels, less eating out. I have started a blog to get more information out to the world, used some social network sites to explain my situation, emailed old managers, and friends to see if something comes up.

--
Jake

[Julia]

I would take the severance and any unemployment I was eligible for. I'd probably take a good look at jobs in the new career I've been transitioning to with my almost completed masters. I've already been working side jobs, so I'd keep working those while finishing my degree.

However... Thanks to the inspiration of personal finance blogs, last year I was able to bring my entire debt down to zero. I also cut out a lot of non-needs... periodical subscriptions, cable, coaching, regular massages, etc. Right now I'm able to invest a bigger portion of my paycheck, and that's starting to add up. By having increased investment funds AND by cutting back on my regular expenses, I've probably quadrupled how long I can live comfortably without a job. By paying off all my debt, I've extended it by years.

I think I'll keep living this way, so that if the day comes when I'm laid off, I just might be able to call it the first day of retirement.

[fathersez]

Hmm....let's just say that this post is most timely for me....hehe

[Andrew]

The networking component is pretty critical -- when I got handed the pink slip, I immediately took steps to boost my network online and off...I've been pretty good at maintaining connections, so it wasn't too tough.

I found that http://www.freeagentnet.com was pretty good for meeting some others in the same unemployment/laid off boat as I was. Its a good spot to swap tips, hear what others are up to, and generally figure out whats next, since not everyone (myself included) is going to immediately start looking for the exact same type of job in the same industry...