Recent layoffs across various sectors, particularly in technology and biotechnology, have prompted many to reassess their financial strategies. According to a financial planning firm, the number of layoffs among clients has surged in recent quarters, marking a notable shift from trends observed in the past decade. While losing a job can feel overwhelming, there are proactive measures individuals can take to safeguard their finances during this challenging period.
Key Financial Steps to Consider After a Layoff
When faced with job loss, it is crucial to approach the situation with a structured financial plan. Here are six essential steps that financial planners recommend to clients dealing with unemployment.
1. Negotiate Your Severance Package
Many individuals overlook the potential of negotiating their severance package. Just as one would negotiate salary and benefits when starting a new job, similar tactics can be applied to severance agreements. These packages may include lump sum payments, equity grants, and unused paid time off. Additionally, consider requesting support for career coaching, training programs, or connections with recruitment specialists. Companies typically allow employees time to review and negotiate these packages, so it is vital to use this time effectively by researching company policies and understanding legal rights.
2. Establish an Emergency Budget
The immediate financial impact of losing a job often stems from the loss of regular income. To address this, individuals should create an emergency budget that prioritizes essential expenses. Begin by examining existing budget records and cutting discretionary spending. Fixed costs, such as mortgage and utility bills, should remain, but flexible expenses can be adjusted to extend cash reserves. While establishing this budget may not be enjoyable, it is a necessary step to manage finances during unemployment.
3. Delay Non-Essential Purchases
In times of uncertainty, reassessing upcoming purchases is essential. Avoid making significant financial commitments or large fixed-cost purchases until re-employment is secured. This includes postponing any spending that does not directly support immediate needs, helping to ease financial strain during this transitional period.
Understanding Health Insurance and Benefits
Losing a job often leads to questions about health insurance and other benefits.
4. Explore Health Insurance Options
In the event of a layoff, COBRA may provide continued health insurance coverage for up to 18 months. Understanding the terms of severance agreements is critical, as options may vary by state. For those in Massachusetts, or states with similar exchanges, researching private coverage through platforms like HealthCare.gov can also be beneficial. Applying for unemployment benefits should be a priority, as eligibility depends on the specifics of the layoff.
5. Identify Coverage Gaps
Beyond health insurance, employees may lose other benefits, including life and disability insurance. It is advisable to inquire whether these policies are portable, allowing individuals to maintain coverage independently. If not portable, consulting an independent insurance broker about private term life or long-term disability options can help fill any gaps in coverage.
6. Consult Your Financial Planner
Lastly, maintaining communication with a financial planner is crucial during this period. A qualified financial planner can provide guidance on the best steps to take, assist with job offers, and manage the technical aspects of financial planning. Their expertise can be invaluable in navigating this challenging time and ensuring that financial strategies remain aligned with long-term goals.
As layoffs continue to affect various industries, taking proactive financial steps can mitigate the stress of job loss. By negotiating severance packages, establishing emergency budgets, and understanding health benefits, individuals can better prepare for unexpected financial challenges.
