Written by Hazel Secco, CFP®, CDFA®
Losing a job can feel emotionally and financially destabilizing. It often arrives without warning and leaves you facing uncertainty about income, benefits, and next steps. While the experience can be overwhelming, it can also become a pivotal moment to regroup, reassess, and build a stronger foundation for the future.
This guide walks you through the key financial and practical steps to take after a layoff—so you can move forward with clarity, confidence, and intention.
Prioritizing Your Financial Health
When faced with a layoff, it’s natural to feel anxious or frozen. The first step is to pause, take a breath, and assess your financial situation objectively. Clarity brings control.
Evaluate Your Assets and Liabilities
Start by listing all available resources:
- Cash and savings
- Investment and retirement accounts
- Severance pay or other income sources
Then list your liabilities:
- Rent or mortgage
- Credit cards and loans
- Insurance premiums and other obligations
Seeing the full picture helps you make informed decisions rather than reactive ones.
Categorize Your Expenses
Divide spending into essential and non-essential categories.
- Essential: housing, utilities, food, healthcare, insurance
- Non-essential: subscriptions, travel, dining out, discretionary purchases
This step allows you to preserve cash while still meeting your core needs.
Establish a Temporary Budget
Create a short-term, flexible budget focused on essentials. This is not permanent—it’s a bridge. Adjust as your situation evolves.
Accessing Financial Assistance
Apply for Unemployment Benefits
File for unemployment benefits as soon as possible. These payments provide temporary income while you search for your next opportunity. Eligibility and benefits vary by state, so review your state’s requirements carefully.
Review and Negotiate Your Severance Package
If you receive severance, review it closely. Severance may include:
- Cash compensation
- Continued health insurance coverage
- Equity or bonus considerations
In some cases, severance terms may be negotiable. Consulting an employment attorney or trusted advisor can help ensure fairness.
Managing Healthcare Coverage After a Layoff
Healthcare decisions are among the most important after job loss.
COBRA Coverage
COBRA allows you to continue your employer’s health plan for a limited time, but you’ll pay the full premium. While expensive, it may be worth it if you have ongoing medical needs or want continuity of care.
ACA Marketplace Plans
Losing a job triggers a special enrollment period on the health insurance marketplace. Depending on income, you may qualify for subsidies that significantly reduce premiums.
Review eligibility carefully to avoid gaps in coverage.
Managing Retirement Accounts After a Layoff
A layoff often raises questions about what to do with your 401(k) or IRA.
401(k) Options
You generally have four choices:
- Roll the account into an IRA
- Roll it into a new employer’s 401(k)
- Leave it with your former employer (if allowed)
- Cash it out (usually discouraged due to taxes and penalties)
Each option has different tax, investment, and flexibility implications.
IRA Considerations
If you roll over retirement funds, be mindful of timing. You typically have 60 days to complete a rollover after receiving a distribution to avoid taxes and penalties.
Avoid making rushed decisions—this is an area where professional guidance is especially valuable.
Debt Management During a Layoff
Prioritize Critical Obligations
Focus on housing, utilities, insurance, and transportation. For other debts, contact creditors early—many offer hardship programs.
Consider Consolidation Carefully
Debt consolidation can simplify payments, but it isn’t right for everyone. Evaluate interest rates and long-term impact before proceeding.
Protecting Your Credit Score
- Monitor your credit reports regularly
- Pay at least minimum balances on time
- Communicate proactively with lenders
Protecting your credit preserves future options for housing, employment, and borrowing.
Rebuilding Your Emergency Fund
Once income stabilizes, rebuild your safety net.
- Target 3–6 months of living expenses
- Automate savings when possible
- Consider high-yield savings accounts for better returns
Your emergency fund is your financial shock absorber.
Rebuilding Your Career
A layoff can also be an opportunity to realign.
- Update your resume and LinkedIn profile
- Invest in certifications
- Leverage your professional network
- Prepare thoughtfully for interviews
This is a chance to move toward work that better fits your life.
Seeking Professional Guidance
Financial Advisors
A CFP® professional can help you:
- Manage cash flow
- Optimize tax decisions
- Avoid costly mistakes with retirement accounts
Avoid making major financial decisions in isolation.
Career Coaches
Career professionals can help refine your strategy, positioning, and confidence.
Mental Health Support
Job loss can impact emotional well-being. Seeking support is a sign of resilience, not weakness.
Final Thoughts
A layoff is disruptive, but it is not permanent. With thoughtful planning and the right support, you can regain stability and move forward stronger than before.
If you’re navigating a layoff and want guidance tailored to your situation, schedule a complimentary consultation. At Align Financial Solutions, we help professionals make confident, intentional decisions during life transitions—so they can move forward with clarity and purpose.