Although the economy is improving, apparently that does not mean the end of layoffs. Indeed, recent high-profile downsizings in Georgia (Coca-Cola) and Minnesota (Supervalu, IBM) are a reminder that layoffs have become a corporate cost-cutting tool for any economy.
Whether one’s employer is a gigantic multinational or a small family business, preparation is the key for surviving a layoff. To that end, today’s column will provide tips for financial survival after a layoff, with columns on surviving emotionally and professionally to follow in the next two weeks.
Financial strategies before, and immediately after the layoff:
1. Learn the details of your severance package, if you have one. You may need an attorney’s assistance if you’re being asked to sign away rights. Most of these agreements are relatively harmless, but some can really sting. Also, if you signed a non-compete agreement when you joined this employer, try now to negotiate a revision allowing you to consider more work options.
2. Get a handle on your health insurance. Every employee should know what their health insurance would cost if they had to pay it themselves. This is the amount you will pay if you opt to continue coverage under COBRA, the federal legislation that allows you to keep (and pay for) coverage 18 months after separating from an employer. Once you have this figure, shop other policies to see if switching will save you money.
3. Attend to your 401(k) or other financial assets tied to the company. In addition to decisions about rolling over these funds, you must also arrange immediate repayment for any loans that you may have taken from your retirement account.
4. Explore the government benefits available to you. In the case of a layoff, you are most likely eligible for unemployment benefits. You may also qualify for a state or federally funded dislocated worker program that would provide career counseling and retraining benefits. Contact your state workforce center to ask what you might be eligible for.
5. If you’ve been using a company car, you’ll have to troubleshoot new transportation on short notice. Resist the temptation to purchase the company vehicle if that option is offered, at least until you’ve had a chance to work out your budget.
6. Create a household budget that accounts for best- and worst-case scenarios. When it comes to reducing expenses, make as many cuts as you can early in the layoff period in order to maximize your savings.
Financial tips for the duration of the layoff:
7. Keep your money close at hand. Don’t give in to the impulse to pay off a debt with your savings account. During your transition, liquid assets are king. Likewise, reconsider family expenses such as college assistance for your children. At the very least, submit a revised financial aid form that reflects your current earning status. But really — think very hard about this and other non-household, non-survival expenses.
8. If adult children live at home, they need to contribute to the household budget.
9. Think about your housing. If you had intended to downsize your home anyway, or have considered getting roommates, now may be the time.
10. Consider bankruptcy and foreclosure. These financial extremes are not the inevitable results of a layoff, by any means. But if you are already struggling and discern that you are only months away from such a precipice, there may be little point in waiting.
11. Pick up a part-time job, pronto. Even though your wages will offset your unemployment checks, in most cases the duration of those benefits will be extended — so it’s not necessarily a net loss to work at a low-wage job. Basically, if you’re earning more than it costs to work, you’re doing the right thing. Your overall financial survival during this period will hinge on a single key concept: More money needs to come into the household than goes out.
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