How To Financially Prepared For Being Laid Off

How To Financially Prepared For Being Laid Off

Any time the economy begins to struggle, people try to prepare for difficult times. Even if you’re not doing anything else to prepare for a recession, you should consider your plan for being laid off. In the worst-case scenario, what will you do? You might not be able to save your job, but you can have a financial plan for unemployment. Here’s a guide to preparing for a layoff in a way that leaves you out of debt and ready for anything.

Determine How Much Money You Need

If you’re the victim of a layoff, it could be months before you find another job. While you might have a plan for finding a job during that time, do you have a plan for making ends meet? You should have at least three to six months of living expenses in a savings account somewhere.

To determine how much money you need to save up, do the math. How much money do you spend on food, shelter, transportation, and healthcare every month? You don’t need to include frivolous expenses, like date night dinners at expensive restaurants. Instead, calculate the bare minimum that you need to pay your bills. If you don’t have enough money saved up, you could end up accumulating debt or risking eviction or bankruptcy.

For some families, having thousands of dollars in savings isn’t an option. In fact, one study by the Consumer Financial Protection Bureau revealed that about 40% of individuals had less than one month of savings in the bank. Even worse, 24% of individuals had no emergency fund. Do the math and figure out how much money you should have saved up in the event you’re laid off.

Set a Realistic Goal

After you do the math, you need to consider the reality of the situation. For instance, your calculations may have shown you that you need $18,000 to live comfortably for six months. If you don’t have any money saved and earn a small salary, you probably can’t save $18,000 in a reasonable amount of time.

So, start small. Set a more attainable goal by saving up enough for three months of unemployment. Additionally, you can make a more realistic goal by determining how much money you can save up in one month. After doing some math, you might realize that you can save $900 in one month. Set that as your goal, and make every effort to reach that goal. Generally, people are able to save about 5% or more of each paycheck.

When you have an attainable goal, it’s easier to save money. You can break your goal down to a shorter time period, like two weeks. Then, when you meet your goal, you have a sense of accomplishment and are more likely to continue on the path.

Look Into Savings Accounts

A traditional savings account doesn’t give you much of an opportunity to earn money. In the scheme of things, a one percent interest rate doesn’t help your money grow in a few months. However, there are some savings accounts designed to give you more of a return. High-yield savings accounts give you higher yields and can help your money grow.

Instead of having your money sit around in a bank account, why not let your money work for you? Although you won’t get rich by using a high-yield account, you can watch your money grow. Research your options and pick a high-yield savings account that offers you everything you want and need.

Find Out About Severance Packages

Some employers offer generous severance packages to their employees. In the event of a layoff, you could be eligible for a severance package. Talk to your HR department or manager to find out whether or not the company offers severance packages.

Similarly, you can research your state’s unemployment benefits. If you’re laid off, you may be eligible for money from the government. Find out what you would need to do to qualify for the package, and write down a list of things you should do to sign up for the benefits. In the unfortunate situation of a layoff, you won’t need to stress or scramble to come up with a plan.

Consider Your Stocks and Investment Portfolio

If you haven’t paid much attention to your investment portfolio, now may be the time to give it some TLC. Does your employer offer stock options? You might want to pull your money out of the company’s stock. If you’re worried about a layoff, the company isn’t doing well. In addition to losing your job, you could lose all your money in the stock market.

Analyze Your Debt

How much debt do you currently have? If you’re unemployed, you’ll still need to make payments on your debt. You should be well aware of how much money you owe on credit cards, car loans, and more. During your unemployment period, you need to continue to pay those debts or you could end up with bad credit and late payment fees.

In some cases, you can request that a lender gives you a forbearance. Spend some time researching your debts and find out if forbearance would be an option for any of them. Of course, you should wait for the layoff to initiate the forbearance period. If you start it too early, you could end up with payments restarting before you have time to find a new job.

Another option is to request a lower minimum payment. Before you’re in dire straits, call up your debt companies and ask if you can have lower payments. There’s no guarantee that the company will agree, but it’s worth looking into.

Have a Job Search Plan

Finally, you should have a plan for finding a new job. As part of your plan, you should update your resume. Start thinking about which roles you want to apply for. If possible, you may want to target your search for recession-proof industries. Once you’re laid off, you can follow your plan and start the job hunt immediately.

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