How to Prepare for a Job Loss: 10 Steps to Take Now

Are you prepared for a job loss?

Whether you work for the federal government or not, you should always be prepared for a job loss because not being prepared could cause a severe hit to your finances. I bring up the federal government’s systemic firing of employees because it’s a relevant topic. Many Americans don’t have enough saved for an emergency, never mind a layoff that could put them on the brink of bankruptcy or foreclosure.

Even if your place of employment seems safe, think again. No one is safe because no one is indispensable. You always need to be prepared for a job loss, even if you think you’re not going to be laid off. You could become disabled or may need to reduce hours to care for a family member. Anything can cause you to separate from your job.

That’s why you need to prepare for any loss of income.

Don’t think that you’re safe just because you don’t work for the federal government. According to Marketplace:

Each federal layoff could result in the loss of 1.3 additional workers in the private sector, according to Patrick Clapp, senior economic consultant at Chmura Economics & Analytics, a labor market consulting and data firm.

Businesses that contract with the federal government, small businesses that provides goods and services, housing, transportation and the overall economy will suffer this impact.

My first tip has to do with how we tend underestimate (or sometimes overestimate) how much we spend and what we’re buying. I saw a video of a woman who spent $700 at Target in December and couldn’t remember what she’d purchased. And get this. She’d already done her Christmas shopping, so she just bought a bunch of crap she didn’t need.

I used to be the same way, thinking that I was spending X dollars on groceries or eating out, when the reality was much more! So my #1 tip is to track your money. It’s hard and annoying and people think it’s cumbersome or tedious, but I promise, you’ll be surprised.

1. Show Me The Money!

Tracking your expenses doesn’t have to be complicated or tedious. Here are five ways or tools to use to track how you’re spending money:

• An app. There are hundreds of apps for Apple and Android phones that help with tracking. Some are free and some are paid. Some connect to your checking account and import the information and categorize it for you while others require manual entry. If you don’t want to connect your accounts, you’ll need to choose manual entry.
• Your bank or credit union’s app. Many financial institutions already categorize your spending. I’ve found that my credit union app isn’t very intuitive because it may put something from the grocery store in the car category. So I had to go in manually to change these errors. I don’t like this option because I prefer to see my numbers on a monitor.
• Excel, Google Sheets or any other spreadsheet. I use Excel and I make it simple. I collect my receipts and every couple days or so, I go through them and enter the expense into my spreadsheet. An image of my spreadsheet is below to give you an idea of what info I collect.
• Notebook. Find a notebook and keep it in your car, backpack or handbag. Every time you make a purchase, note the date, item, category and price. At the end of the month, add up the different categories (home, personal care, pets, car) to see how much you’re spending.
• Download and print out your checking account statements. Assign a highlighter color to each category and mark up your statement. Add up the different categories.

Here’s a screenshot of how I set up my spreadsheet in Excel. It’s super basic and the only reason I color-code my categories is because it helps to differentiate groceries from pets, for example. If you do this on paper, you can use highlighters. I include the place of purchase in case I need it for reference, but at the end of the month, I only care about the category and how much I spent in each category.

2. Build An Emergency Fund

Whether you have debt or not, you can still save money. See my blog post on this topic here. This is where you have to decide if you’re going to continue making minimum payments on your debt so you can build your emergency fund.

An emergency fund is great protection for a layoff or job loss.

So if you have debt, look these scenarios to help you decide how to pay debt and build your savings.

Let’s say you have $14,500 in credit card debt and $5800 in savings. Your minimum credit card payment is $329 a month, but you’ve been paying $400 a month because you want to pay off that debt. Yay! We can all live with less debt for sure. But if you’re facing a job loss, think about the following options to help you decide how much to pay and how much to save:

• Pay $329 toward the debt and put the other $71 in savings (at 3.7%) and in one year you’ll have $6687.29
• Pay $350 toward the debt and put the other $50 in savings (at 3.7%) and in one year you’ll have $6437.66
• Pay $400 toward the debt and put $0 toward savings and assuming you are earning 3.7% in interest, in one year you’ll have $5843.31

(I used the Interest Calculator at calculator.net to get these figures. As of this writing, Ally Bank is offering 3.7% on their high-yield savings account, which is why I used that figure in the calculations. Ally compounds interest daily.)

3. Update Your Resume

This is something you should be doing regularly anyway. Make a list of projects you lead, completed and delivered. Did you create any products? Have you taken any additional training?

Keep copies of all work-related correspondence that celebrates your accomplishments. For example, a “good job leading the team!” from your boss or a co-worker.

Keep copies of projects or take pictures. Use a flash drive or other media to collect proof of things you’ve worked on, because this will help you remember and also serve as proof.

Go back to your college and use any career or job resources available to alumni. Continue going to events that are related to your industry and even those that aren’t. You may be an engineer but you also love to hike, so join a hiking group. Someone may be in human resources and can review your resume for you, or offer advice.

4. Downsize

Not all the way. And not forever.

By downsize, I mean, look at your subscriptions and see if any can be replaced or temporarily suspended. Trade Audible for Libby or put a pause on Netflix. These expenses won’t make a huge dent in your monthly budget and you have to decide if it’s worth it to you to cut or suspend.

I’ve always hesitated telling people to cut back because you can only cut back so much, whereas the ability to increase your income is pretty limitless. I also don’t subscribe to the idea that you have to cut out every single bit of joy and entertainment. This can make cutting back feel like a punishment. And if you’re about to lose your job, you’re already being punished. So this is a personal choice and I don’t judge people one way or the other. Do what works for you and think of things as temporary measures rather than all or nothing.

Is it possible to share housing? Move in with family? Rent out a room? None of these things has to be permanent, but if it turns out to be longer than you expected, it will still give you the opportunity to save money and not feel like you’re struggling.

5. Health Care and Medications

If you’re past due for wellness exams or dental checkups, get moving and schedule appointments. If you’re laid off in the middle of the month, you usually have coverage until the last day of the month.

Refill any prescriptions and look up discounts for any medications you take regularly. Have your prescriptions nearby while you compare prices so you can enter the exact name and dosage to get pricing. Here are some websites to get you started:

• Amazon Pharmacy
• Array Rx Discount Card for residents of Connecticut, Nevada, Oregon and Washington
• Costco
• GoodRx
• Mark Cuban Cost Plus Drugs
• Singlecare.com
• Walmart

6. Roll over Beethoven! (and Your Retirement)

If you have a 401(k) or 403(b) or other plan, decide if you’re going to leave it with your current employer or if you’re rolling it over to an IRA or Roth IRA. Maybe you’re happy with the company your employer uses or maybe you want more control and more options.

If you decide to roll your plan over, you’ll first need to open an account at a brokerage like Fidelity or Schwab. If you’re not comfortable doing this on your own, their customer service representatives will help you. They’ll walk you through each step. Then when you’re ready to roll over your funds, your account is set up and all you have to do is access your employer’s plan to request a roll over.

TIP: I hope you don’t do this, but if you opt to have a check sent to you for YOU to deposit into your new IRA, make sure the check IS NOT made out to you. The IRS will see this as you cashing out your retirement and will tax you (and perhaps penalize you as well). It’s a lot simpler, easier, faster to have the funds transferred directly from one brokerage to another.

7. Get Your Money Back

Gather all expenses receipts and submit them as soon as possible. You should be doing this regardless of a layoff because that’s YOUR money you’ve been using for work expenses.

The company still has to pay you for whatever expenses are owed, even if you leave the job, but it’s easier to have this all done and refunded before any separation. This is especially urgent if you have to log in to a website to upload the receipts with your work e-mail, which you won’t have access to when you leave.

8. Review Your Contract

If you signed a contract when you took the job, review it to make sure everyone is playing the roles the way they’re laid out. You want to make sure that you’re getting any severance pay, bonuses or whatever benefits that are coming to you. Different things will happen depending on how you lose your job, whether you quit, are fired or laid off. Your contact is your backup in case you need to contact an attorney.

9. Download and Review Your Employee Handbook

Your contact, if you have one, will have the last word, but a handbook will come in handy if you need to see what rights you have regarding PTO, sick leave, any accruals, anything that you get paid for in case of job separation. In any case, keep a copy of it by sending it to your personal email address or saving to a flash drive.

10. Get Benefits

Go to your state’s unemployment benefits agency to see if you qualify for unemployment. Every state has its own rules, so you’ll need to do an online search for something like “unemployment office [your state].” Besides unemployment benefits, see what other resources are available. Does your state offer training to veterans or people who are disabled? Do they offer free courses to help you brush up on your skills? Do they offer workshops? This should all be stated on the agency website, but it won’t hurt to ask the case manager.

Apply for food stamps and Medicaid, if you’re eligible. Your state should have a chart that shows the limits of household income to determine eligibility. Don’t be embarrassed to apply. This is a benefit that YOU pay for with your taxes. It’s there to help you. No one says you’re going to be on there forever.

When my mother applied for food stamps back in April 1985, she was still recovering from a terrible car accident the previous August. We were on food stamps for about a year when she was cleared to return to work. After that, we were never on food stamps again. But every situation is different. You may not have to apply for food stamps or you may be on them for longer than you expected. Again, this is a benefit for you in your time of need.

A New Beginning

I know what it’s like to lose a job. I’ve been fired, I’ve quit and I’ve had contracts expire. The scariest was when I found out I was pregnant with my last kiddo and I decided not to continue working for a micromanager who wouldn’t let me breathe. But I made it.

The best way to endure something as devastating as a job loss is to be prepared. It will soften the blow and give you the time and space to gather yourself and begin a new journey forward.

Let me know in the comments if you have any tips or if you have experience you can share!