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What to Do if You’re Laid Off (and How to Prepare)

If you’ve been laid off, or if you’re worried your company is about to cut jobs, you’re not alone. Over the last few years, tons of companies large and small have made cuts to their staff. But don’t worry—you don’t have to be caught off guard.

I’m going to walk through some practical and effective ways to prepare for a layoff so you can move forward in your career after it happens. Losing your job for any reason isn’t fun. But the uncertainty of it won’t be so scary when you have a plan—and I’m here to help you press on!

What Does It Mean to Be Laid Off? 

Being laid off means your employer had to cut down on the number of staff members—and you’re included in that group. The harsh reality is, when the economy grinds to a halt (like we’ve seen in the past few years), or a business undergoes a reorganization or simply can’t meet payroll, one of the quickest ways to cut back is to cut jobs. Unfortunately, this means layoffs.

Most businesses aren’t letting people go because they want to, but because they have no other option. Getting laid off doesn’t feel good, but unlike being fired, a layoff has nothing to do with you personally. It’s simply a business decision, and it’s one you can prepare for.

Layoff vs. Furlough vs. Firing: What Do They Mean?

It’s important to know the differences between a few types of job loss. As I mentioned, layoffs happen when a company gets rid of positions within the business or downsizes their staff, usually because of a poor economy.

Furlough means a person is still employed by a business, but they’re on a temporary (and usually involuntary) unpaid leave, often because there’s a shortage of work or the economy can’t support their role for the time being.

Now, being fired is a different story. When someone gets fired, that means they’ve been permanently dismissed. That person’s employment ended because of their poor performance, unprofessional behavior or legal issues like a breach of contract.

Common Causes of Layoffs

Sometimes layoffs happen because of hard economic times or because a company goes through a major change, like being bought out or reorganized. In both situations, jobs are often cut. Here are some other common causes of layoffs:

  • A recession: When the economy tanks, businesses have to adjust their spending—including payroll.
  • Employee overlap: Sometimes jobs are cut when two people are doing the work of one person.
  • Downsizing: Maybe a business has lost clients or revenue, and there are more employees than needed for the work.
  • Restructuring: When a business reorganizes its teams, people could be laid off if their roles aren’t necessary for the new teams.
  • A company closes: When a business shuts its doors, everyone will be laid off because, well, there’s no more work to be done.

No matter the cause of the layoff, you have what it takes to move forward after this setback.

How to Prepare for a Layoff

If you think your company might go through a round of layoffs, there are a few things you can do to prepare for a job loss. Now, don’t freak out just yet—you don’t know if any rumors you’ve heard about layoffs are actually true. Still, it’s never a bad idea to get your ducks in a row in case you do lose your job. Here are 10 steps to take to prepare for a layoff:

1. Start saving up an emergency fund.

Losing your job is a lot less stressful when you’ve got an emergency fund to fall back on. If you’re familiar with the Baby Steps, we recommend saving $1,000 as a starter emergency fund while you pay off debt, and then—after your debt is paid off—building a 3–6 month fully funded emergency fund for situations exactly like a job loss.

You deserve to win at work. Our new book and assessment will show you how.

But if you think layoffs are coming, start stacking cash now, even if you still have debt. Make minimum payments on your debts and save as much as you can. Then, when you know your job is secure, you can start back up on the Baby Steps with gazelle intensity.

2. Save important documents like your W-2, pay stubs and insurance information.

Collect these documents while you still have access to your HR files. These will be helpful if you apply for unemployment benefits later or if you lose health insurance coverage and have to switch to a temporary plan.

3. Schedule medical appointments as needed.

While you still have health insurance coverage, go ahead and take care of any doctor appointments you’ve been meaning to schedule. It’s possible you’ll get extended health insurance coverage as part of your severance package, but go ahead and get the care you need now while you’re covered. Also make sure to refill any prescriptions that are close to running out.

4. Start planning how you’d budget severance pay.

You might not know exactly how much you’d receive in a severance package, but you can start planning how you’d budget that payout. For example, many severance packages pay one to two weeks of salary for every year employed at the company.

If you have a strong feeling your job is on the chopping block, start planning how you’d intentionally spend your severance. Severance packages aren’t a permission slip to go buy a new gaming system or go on vacation—they should be used to keep you afloat until you land a new job.

5. Clean up personal files from your computer.

If you’ve stored any personal files like images, documents or debit card information on your work computer, now is a good time to start clearing that data. It’s not a great idea to use your work computer for personal reasons anyway, as the technology belongs to the company.

6. Update your resumé and contacts list.

While you’re still employed, go ahead and make a list of your current responsibilities and any accomplishments you’re proud of. Jot down the names and emails of important contacts you have good relationships with. This information will come in handy if you find yourself looking for a new job.

7. Gather notes about your successes in this current role.

Before a layoff, take note of all your professional accomplishments and successes in your current role. If you’ve broken any records, outpaced sales goals, won recognition for excellent service, etc., list those accomplishments on your resumé. This will add credibility to your resumé—and remind you of what a hard worker you are.

8. Think about your skills that you can apply to other jobs.

Chances are, you already have ideas about what you’d like to do if you got laid off from work. Would you change industries? Stay in the same industry but try a different role? Think about all the skills you’ve learned that you can apply to other jobs—no matter the industry you’d want to pursue in the future.

9. Start looking for other job opportunities now.

If you can time it right, you could start a new, better-paying job right after getting laid off from your current position. Don’t wait to apply for new opportunities until after you lose your job—start searching now! Get that interview ball rolling so you can transition into a new job sooner than later. That way, you won’t have a big gap between paychecks, and it’ll make your severance feel like a signing bonus.

10. Don’t panic.

We don’t make good decisions when we’re panicking. You haven’t been laid off yet, so you have time to make a plan. In the meantime, start having conversations with mentors or a trusted counselor who can give you support while you wait for news about your job.

What to Do After Being Laid Off

If you’ve learned that you’re definitely part of your company’s layoffs, you’re probably feeling a lot of emotions right now—especially if the news comes at a bad time, like around Christmas or before a big family vacation. That’s to be expected. Whether you’re feeling scared or angry (or both), give yourself time and space to process before you do anything rash. 

Take a deep breath.

Layoffs can be shocking because they’re usually unexpected. Lots of leaders don’t want their team members to suffer, but they turn to layoffs as a last resort to help save the company or cut costs. And the reality is, losing your job just sucks.

So, give yourself some time to pause, process and find perspective. This could be a chance to finally switch careers and start your dream job or go back to school to finish your degree.

Collect your final paycheck or severance pay.

Ask your employer how you’ll get your final paycheck after being laid off. Your employer might also offer you severance pay when they let you go. This could be a one-time payment, or it could be several payments spaced out over a few weeks or months. The Fair Labor Standards Act doesn’t require that your employer give you severance benefits, so this will vary from company to company.

If you don’t receive a severance package, unemployment is another option that can help you stay afloat after a layoff. You can get unemployment insurance benefits by filing a claim with the unemployment insurance program in the state where your job was. These guidelines vary by state, so check out the U.S. Department of Labor website for more information.

Figure out your health insurance options.

If your health insurance coverage ended with your layoff, you have a few options to keep a policy. One of your options is COBRA insurance, which lets you stay on your employer’s plan for up to 18 months. But most of the time, your former employer isn’t going to pay their side of the premium, which means your monthly payments could be pretty high. You’ll probably save money on a government health care plan or a private plan with a high deductible. Take the 5-Minute Coverage Checkup to figure out what type of insurance you and your family actually need.

Tap into your support system.

When you’re ready, be open with your friends and family about your job situation. You don’t have to share all the details with everyone—in fact, feel free to set some boundaries if you don’t want them to pester you with questions. But acknowledge that you’re facing a hard time and surround yourself with people who will support you and encourage you. You can also tap into your LinkedIn network for support.

If you’re married, be open with your spouse. Don’t let shame keep you isolated and keep them in the dark. If you have kids, talk about how the job loss will impact your lifestyle and the time you spend together (in an age-appropriate way). Do whatever you have to do to get the support you need.

Make a new budget.

It’s scary to think about what will happen if you miss a paycheck. Hopefully you have an emergency fund (3–6 months of living expenses saved up) to get you through the tough times. But whether you do or not, it’s time to sit down and make a zero-based budget based on your new income level. And no, this isn’t the time to make any big or unplanned purchases! So keep that new TV out of your budget.

EveryDollar is our budgeting app that makes it super easy to start taking control of your money (and it's free!). Once you make a plan for your spending, it's time to hit pause on all nonessential purchases—like streaming services and gym memberships—at least until your income level is back to normal. 

Create some new daily routines.

Your time has been shifted around, so use it to your advantage! Your top priority is to find a new job (and we’ll talk about that below). But now that you have a little more freedom, this is a good time to pick up that novel you’ve been wanting to read, volunteer in your community, or spend more time walking around your neighborhood.

Don’t stop showering, waking up at a decent hour, or exercising just because you’re not going in to work. Taking care of your overall health during this time is so important to stay motivated and well. (Not to mention—following current events, being involved in your community, and continuing to grow personally will show your next hiring manager you used this time wisely!)

How to Find a Job After Being Laid Off

You can’t live on severance pay or unemployment benefits for long, especially if you have a family to take care of. Here are three practical ways to get back out in the job market and look for work:

1. Get clear on your talents, passions and mission.

Okay, guys, first things first. When you’re looking for a new job after being laid off, take this opportunity to really think about your next step. What were you born to do? If you’re not sure, check out my Get Clear Career Assessment. You’ll take a quick assessment to understand your top talents, passions and mission. You’ll also get a personal purpose statement that can help you apply your strengths to your next job.

2. Use your connections to move into another field. 

If your whole industry has taken a hit this past year, it might be time to start branching out into other types of work. A more recession-proof job can give you the job security you're looking for. Be willing to step outside your comfort zone and even take lower pay for the time being.

Start your job search by making a list of people in your immediate circle who can help you get connected. Reach out and let them know about your situation. Be bold—but not obnoxious—as you ask about work opportunities. You never know what opportunities might be just one conversation away. But be mindful and try not to contact someone for help at a time when they’re stressed about their own work situation. 

If you don’t have any success asking your immediate circle, don’t be discouraged. Often, it’s not about who you know—it’s who they know. Keep digging and expanding your network. It might take a few days or weeks, but if you’re persistent, you’ll start to find opportunities. And as you prepare for your interviews, make sure your resumé is in good shape!

3. Check online job boards for contract and part-time work. 

Sites like LinkedIn and Indeed update their job boards regularly with relevant and timely work opportunities. Check in often to find opportunities that match your skill set. Also keep an eye on your favorite local businesses. They might need extra help during the holidays or tourist seasons.

You've Got This

Getting laid off from a job is tough. But you can use this time to your advantage if you stay calm, evaluate what it is you want to tackle next, and come up with a game plan to get back out there and start preparing for interviews.

This is not the end, and it won't define you. You have what it takes. Press on!

Next Steps

1. Check up on your finances. First things first, make sure you and your family have enough money to keep food in the fridge, gas in the car, and the lights on until you find a new job. If not, you'll need to find a temporary job—like gig work, a side hustle or retail—so you can make ends meet until you get a new full-time opportunity.

2. Start looking for a new job. You don't need me to tell you this one! Get out there and tune up your resumé, make new connections, and start applying.

3. Get clear on what role is right for you. Use this time as an opportunity to really ponder your next career move. Ask yourself: Am I using my talents? Am I passionate about my work? Do I care about the results I'm creating every day? If not, my free Career Clarity Guide will help you identify new roles—or even a new career—that'll let you answer yes to all three of those questions.

Get the Guide

Frequently Asked Questions

Can I negotiate my severance package?

Sometimes! Companies aren’t obligated to offer severance pay. But you can meet with your HR director or an employment attorney to review the terms of your severance agreement—this can include payout for unused vacation, health insurance coverage and any additional funds you’re offered as part of the separation.

How do I collect unemployment benefits?

If you got laid off through no fault of your own and meet other eligibility requirements, you should contact your state’s unemployment insurance program as soon as possible after losing your job.1

What do I do with my retirement accounts after losing my job?

If you’ve been contributing to an employer-sponsored 401(k), you can leave it in the current account, roll it over into a new employer’s 401(k), or roll it over into an Individual Retirement Account (IRA).

How do keep my health insurance after getting laid off?

You can enroll in health insurance plans through the Health Insurance Marketplace or sign up for coverage through COBRA.3 But these policies will likely cost more than your employer-sponsored plan, so budget accordingly.

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Ken Coleman

About the author

Ken Coleman

Ken Coleman is the author of the national bestselling book From Paycheck to Purpose and the #1 national bestseller The Proximity Principle. He hosts The Ken Coleman Show, a caller-driven show that helps listeners find the work they’re wired to do. Ken also co-hosts The Ramsey Show, the second-largest talk radio show in America, and makes regular appearances on Fox News and Fox Business. Through his speaking, broadcasting and syndicated columns, Ken gives people expert advice, providing strategic steps to get clear on their unique purpose and grow professionally. Learn More.

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