Whenever there's talk of a recession, as there has been lately, there's talk of layoffs. A recent CNBC All-America Workforce survey found that more than 80% of employed people are concerned about a recession in the next year. And in a June 2022 Insight Global Survey,* 87% of managers said they'd likely have to lay off employees during a recession. But even though there are many positive economic signs, it's possible that your employer might make cutbacks. And it's never a bad time to prepare for the unexpected.
Here's how you can shore up your financial, career, and emotional health to prep for the proverbial pink slip, no matter when (or whether) it comes.
The money stuff
1. Beef up your emergency fund When paychecks stop coming, an emergency fund with at least 3 to 6 months of essential expenses can be a lifeline. “Make sure that you understand what your essential versus discretionary expenses are,” says Aliya Padamsee, CFA, CFP®, a director of Financial Solutions at Fidelity. Groceries? Essential. More than a couple streaming platforms? Maybe not. The more discretionary bills you can cut, the bigger the buffer you can create.
2. Research unemployment benefits in your state While you’re figuring out your emergency fund’s size, consider factoring in money you might be eligible to receive through unemployment benefits, says Beau Zhao, CFA, a director of Financial Solutions at Fidelity. Benefits vary from state to state and by your most recent income.
3. Put the credit card away Padamsee and Zhao agree that you shouldn’t rack up credit card charges that you can’t fully pay for each month. You don’t want to accrue interest. You may also want to hold off on unnecessary major purchases. Yes, you need a working furnace, but your new living room furniture set could wait until you have more job security.
4. Research rules around severance and paid time off Dig into your employee handbook or any employment contract you signed for details about severance and PTO payouts at your company. You may be entitled to regular payments for some time after your termination, which will change your emergency fund needs. So might a payout for unused vacation time. But not all companies will pay you for those days after a layoff. If yours won’t, you may want to plan days off ASAP to take advantage of your benefits.
5. If you have a 401(k) loan, make a plan to pay it back Your company may require you to repay your loan’s outstanding balance in full immediately if you get laid off. If you can’t afford to pay off the loan balance in full upon termination, your employer will report the loan’s balance to the IRS as a taxable distribution. Translation: If your loan defaults, you will be on the hook for penalties and taxes. Check your plan rules to see whether you are allowed to continue to pay your loan after separation.
6. Research new health benefits coverage Even though you might be able to stay on your employer’s health plan through COBRA, it’ll cost you up to 102% of the premium. That could be hundreds or even thousands of dollars per month. It’s worth looking at the public marketplace, private plans, or, if you have a partner, their plan. You may also qualify for premium tax credits on the public marketplace, which would reduce your overall health care costs. If you’re concerned about your family’s future coverage, check out your state’s rules for CHIP, the Children’s Health Insurance Program, which offers low-cost coverage for kids in qualifying families.
7. Get medical checkups and fill prescriptions That goes for everyone in your family—including eye and dental care. Even if you’re able to get new coverage quickly, your co-pays, deductibles, and doctor network may change. So make sure your doctors and prescriptions are covered under the new plan, otherwise you will end up footing the entire bill—more reason to make those appointments and refill medications now.
8. Track down your receipts to get paid back If you have receipts for qualified medical expenses to get reimbursed for from a flexible spending account—or receipts for work trips, classes, or any other activities you can expense—turn them in ASAP. While you may be able to submit receipts after a layoff (and your company should reimburse you for receipts from before your termination date), it’s easier to do while you can access company websites.
The career stuff
9. Gather contacts at your current job Collect your colleagues’ info, so you can tap them as references when you apply for new jobs. Just be careful about breaking any agreements you signed, such as not soliciting clients after you leave. You might also want to add phone numbers and email addresses for HR and payroll in case you need to reach out after you’ve left the company.
10. Add your personal email address to important accounts Make sure your work email is not the primary (or only) address listed for important accounts you’ll want access to later, such as professional networking sites and your 401(k). You’d most likely lose access to that email address immediately after a layoff, which could make it harder to sign in.
11. Update your resume and job-related profiles While your recent achievements are top of mind, edit your resume, personal career website, and any online profiles, suggests Meredith Stoddard, life events experience lead at Fidelity. “Make sure your resume lists achievements that are actionable and quantifiable,” Stoddard advises. (For instance, “grew sales by 50% in one year by expanding types of prospects we pursue.”) If it’s not against your company’s rules, ask colleagues to provide recommendations and endorsements on online talent platforms, so they’re available by the time you’re applying for new gigs.
12. Save work documents before your access gets cut off These include examples of your work and positive feedback from peers and managers—just nothing confidential or anything that your company prohibits you from accessing off their network. Stoddard says these could help you stand out as a candidate for a future role. You can upload these with your job applications or print them for a portfolio to bring along on in-person interviews.
13. Know your worth “I've talked to people who were way underpaid and didn't realize it, and others who were doing pretty well,” Stoddard says. Research salaries online for similar roles in your area to check if your current income is in line with the going rate. Then you can more easily see which potential future employers are willing to match your worth and confidently go into applications and negotiations with your target salary.
14. Network It isn’t about the straight line to a new job, Stoddard says: “It’s about getting exposed to new perspectives and understanding more about different people and their work.” If you have these conversations while you’re employed, you’ll have a foot in the door with people who can help you navigate your job search post-layoff. As for contacts you already have, the best networkers stay in touch while they’re working, so when you reach out when you’re unemployed, those people will be more inclined to help.
15. Consider new titles and industries More than half of employed adults who quit their job in 2021 changed their job type or field that same year, according to a Pew Research analysis. So be open to a new role that isn’t necessarily based on what you’ve already done. To plan for a shift, you could ask to shadow colleagues who can teach you a new skill, sign up for classes, or network with people in areas that interest you. Most importantly, “Don’t talk yourself out of your aspirations with negative beliefs, like ‘there’s too much to learn,’” Stoddard says.
16. Separate your identity from your job title “During the dot-com bust, I was laid off, and I was woefully unprepared for how much it ravaged my sense of identity,” Stoddard recalls. She went from managing a third of a company’s employees to jobless. A full life outside of your career could help soften the emotional blow. “Taking the time for introspection, self-discovery, being in nature, giving back, taking a class, and spending time with friends and family can connect you with who you are without defining yourself via a job title,” Stoddard says.
After a layoff
Unfortunately, being prepared for losing your job won't take away the sting if it actually happens, but having a plan in place can help. Then, consider heeding Zhao's tips: "Minimize the spending, maximize the saving, and don't panic."
Keep silver linings in mind too. While Stoddard recalls feeling shame after a layoff, "I've now worked in 4 different industries and am going back to school to get a degree in yet another area of interest," she says. "Look for the opportunity in the tragedy."