Tips for Financially Surviving a Layoff

Losing your job can be emotionally painful (weren’t you doing a good enough job?) and can throw your finances for a major curveball. How will you pay your bills? How long will this situation last?

Take a deep breath, and arm yourself with knowledge for financially surviving a layoff. Whether you’re going through this situation right now or are worried it might occur, you can likely make adjustments and you can make and tap resources to weather this challenge. It’s a phase to move through but not to define you. Read on to learn:

•   How to budget when laid off

•   How to file for unemployment benefits

•   How to prioritize debt

•   How to bring in income.

Preparing Financially for a Layoff

Unfortunately, layoffs seem to be a part of modern life. In the first nine months of 2023, there were more than 605,000 layoffs, which marked a 198% increase versus the year prior. That’s not heartening, but it’s a way of saying that if you are laid off, you are not alone, and it can also be wise to prepare financially for a layoff if you are currently employed.

Not having a steady income probably means you’ll have to figure out how to pay your bills when laid off. Until you find another stream of income, it’s important to keep your budget in order and learn to live within your means. Being financially prepared means having a clear understanding of what your expenses are so you can stay on track, especially with debt, if you have it. There are also resources you can access that may help with your cash flow during this difficult time.

Steps to Take to Prepare for a Layoff

Here are some smart moves that can help you be prepared and not panic if you do get laid off.

Start an Emergency Fund

A common strategy is to build up an emergency fund prior to an event like job loss. It’s a way of preparing for a layoff before it happens. An emergency or rainy day fund is typically a savings account that you’ve been adding to on a weekly or monthly basis. Having roughly three to six months’ (or more) worth of monthly expenses is helpful. That sum can tide you over at a moment of job loss and give you peace of mind.

•   You may want to automate your savings and have a small amount ($25 can get the ball rolling) transferred from checking to savings every payday. Or have that amount direct-deposited into savings.

•   The emergency fund should only be accessed for emergencies, as its name suggests. (No fair dipping into this kind of savings account when there’s an amazing sale at your favorite store.)

•   If you have the opportunity to contribute more than usual (say, you receive a financial windfall, like a bonus or a tax refund), do boost your emergency savings because you never know when you will need to tap into that account.

Budget, Budget, Budget

If you have an inkling that your company is preparing to lay off some employees or if you lose your job, it’s wise to double-check your weekly budget. This means separating your necessary spending from your discretionary spending.

•   Necessary expenses include things like rent or a mortgage, utilities, food, and health insurance. Don’t forget about minimum debt payments, such as student loan and credit card payments.

•   Discretionary spending may include traveling, dining out, new clothes, and entertainment.

It can be helpful to focus on how much you need to spend each month for necessary expenses (some people refer to this as their monthly “nut.”) Make a list of these basic living expenses and see what they total. Then, pre-layoff, you’ll also see how much you can allocate for activities that you want to do. It’s probably not the best idea to spend every penny each month. You want to have extra money at the end of the month to put toward savings.

If and when a layoff hits, you’ll focus on necessities and minimize your discretionary spending (more details below). You can also tweak your budget when unemployed to, say, cut back on some long-term savings to get you through this moment.

File Unemployment Benefits

If you do lose your job, you may be able to qualify for unemployment benefits. This can get some funds flowing your way to help tide you over.

•   Read the eligibility requirements to see if your situation aligns with the rules for unemployment. The eligibility requirements are likely to vary from state to state and may be determined on a case by case basis; payment amounts will vary as well.

•   If you qualify, filing for unemployment benefits will allow you to receive payments if you are out of a job due to no fault of your own. (There is a possibility that those who are fired because they don’t meet job qualifications may receive funds as well.)

•   Generally, to qualify for unemployment benefits, you should be able and available for work, as well as be looking for employment. Once you’ve determined your eligibility, you can file on your state’s official government office of unemployment compensation website. The site should give you guidance on when to expect benefits.

Ask About Severance Packages

Severance pay can be provided for employees after they are no longer employed at a company. Severance is based on the duration of employment, but your employer is not required to provide severance upon termination.

If you were terminated through no fault of your own, employers may pay, for example, two weeks of salary for each year of employment. Severance may also include health insurance benefits and even services to help you find a new job. These can be very helpful supports when you’ve lost your job.

Use Credit Cards Only for Emergencies

If you become unemployed, it’s wise to stop using credit cards to make purchases. Paying with your credit card creates debt that comes with high interest rates (currently more than 20%). At such high interest rates, debt can really snowball.

Also, when you are out of work, it can be challenging to pay an existing credit card balance. If you manage to pay the minimum balances of your credit card debt rather than paying in full every month, the credit card debt may cost you more over time since you also have to factor in added interest.

If you find yourself in this kind of a bind with credit card debt, take action. Consider a balance transfer credit card that offers no or very low interest rates for a period of time. Or speak with a debt counselor at a nonprofit organization like the National Foundation for Credit Counseling (NFCC).

Make Sure Emergency Funds Are in Order

Emergency funds, as mentioned above, are an important part of a financial plan and can be a lifesaver for someone who is unemployed. If you are in a situation where you unexpectedly don’t have a stream of income until you find another job, you’ll be more at ease if you have built up an emergency fund over time, as mentioned above.

In this case, you can dip into your emergency fund for mandatory expenses to fulfill your short-term needs. If you don’t have emergency funds, unemployment benefits become that much more important. Borrowing from a close friend or a family member might also be an option.

Practical Tips for Saving Money After a Job Loss

Saving money after a layoff can certainly be difficult. You don’t have the usual cash infusion to pay your bills and buy groceries. That is why you need to proceed with caution and learn how to economize when you lose your job. Here are strategies for making ends meet during this difficult time.

Get Back on LinkedIn and Start Networking

If you’re job-hunting, Linkedin can be a great tool for networking. The platform is set up so you can find and interact with former colleagues, alumni from your college, and professionals at companies you aspire to work for.

•   Start commenting on people’s Linkedin posts and have conversations with existing connections.

•   Build up your profile so recruiters know your job history, your professional skills, and that you are looking for work. This can lead to job opportunities.

Prioritize and Negotiate Any Debts if Needed

Continuing to pay down debt while unemployed should still be a priority. One strategy to pursue is paying off debt that has the highest interest rate. Debt with higher interest rates cost more, so paying this off first will have you saving money in the long-term.

But “How can I pay down debt if I don’t have income?” you are probably wondering. One answer: Try to negotiate your debt. It can be possible to work with your credit card company to negotiate interest rates, payment amounts, and the terms on your credit card debt.

Avoid Luxuries Temporarily

Being unemployed can be a frightening experience. You no longer have a steady flow of income and may not feel financially prepared to weather short-term expenses. To ease this burden, work to eliminate spending on luxuries. Now might be a good moment to downsize streaming services and other subscriptions.

Also eyeball what expenses you have on the horizon: If you had booked a vacation house or a cruise for a few months down the line, it may make good financial sense to investigate getting a refund. That money could be allocated toward your everyday expenses as you job-hunt.

Look at Investments and Retirement

If you are temporarily out of a job, do your best to keep your hands off your retirement funds. You worked hard to save that money, and it’s there to fund a long-term financial goal. That said, some people do tap their retirement accounts as a last resort when unemployed.

When you withdraw from your retirement account before the age of 59 ½, you will incur a penalty tax. However, there are some cases where you may be able to withdraw funds when unemployed without paying this.

You may be able to set up what’s known as a substantially equal periodic payments (SEPP) over five years or until you hit age 59 ½, whichever is greater. However, if you do receive this kind of distribution, it will likely count as income and may therefore lower any unemployment benefits you may be receiving. Talk with your plan administrator to learn more.

Start a Side Hustle

You might consider starting a side hustle to bring in some extra cash while looking for full-time work. There are many ways to earn more money. You could rent out an extra bedroom in your home or apartment, sell unwanted items, drive for Uber or Lyft, or market your professional skills on online service platforms such as Fiverr or Upwork. These are viable avenues to get some money coming in until you lock down a new job.

The Takeaway

Figuring out how to manage your finances when you are in between jobs can be stressful, but there are ways to prepare and then actions that can help you get by. Building and then tapping an emergency fund, accessing unemployment, and budgeting are some actions to take.

Also make sure your banking partner is making it easy and profitable for you to do business with them.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

How do you manage the emotional impact of getting laid off?

Getting laid off or fired from your job is a tough challenge. You may feel angry and ashamed. Acknowledge those feelings, and remind yourself that millions of others have navigated this situation. You are not alone. Also, taking action can foster feelings of control and personal agency. Updating your resume, networking, reworking your budget, and engaging in self care rituals (like exercise) may also be positive steps.

How do you recover after being laid off?

Recognize the shock and upsetting feelings that you are likely experiencing. Then, take steps to improve your situation: Seek unemployment benefits, apply for jobs, start a side hustle, cut some expenses, and perhaps volunteer to build new skills and fill free time. These moves can help you move forward from your job loss.

Is it better to be fired or laid off?

In both scenarios, you don’t have a job, but if you are fired, it is typically due to a performance issue. With a layoff, you will likely be able to file for unemployment and you may receive severance pay from your employer. When you are fired, you may or may not be able to receive unemployment funds and you will probably not be eligible for severance.

Photo credit: iStock/skynesher

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOBK0124074