What To Do If You Get Laid Off

Zachary Ashburn, CFP®, EA, AFC®

Anytime your job security is threatened or taken away it’s scary. This is our survival kit to help you through it. We'll explore key strategies for managing cash flow, maximizing employee benefits, addressing equity compensation, tax planning, and navigating the layoff process as part of a couple.Let’s get to work.

Step # 1 Breathe

The first thing to do if you get laid off is to breathe. Have an honest conversation with your partner. Reach out to your advisor if you have one. You’ll have some strategic choices to make and a clear head is important. We suggest taking time to review any offers you receive before signing.

Step # 2 The Most Important Step if You Get Layoff

The most important planning step to take if you get laid off is to assess your cash situation. You want to answer the question, “how long is our runway”. To do this you’ll want to account for 4 main things:

-How much cash you currently have
-Any income you’ll have coming in (spouse’s income, severance pay etc)
-Your ongoing required expenses
-Review eligibility for unemployment benefits based on your state and job-loss scenario

Bonus: If you’re considering freelance work you can review our Quickstart Guide for Consultants to get up to speed and launch quickly.

I suggest creating a simple chart to track your cash over the next 6-12 months or so. This can lend a lot of peace of mind to your plan and will look something like this

A Chart of Income and Expenses to Help Navigate What to Do If You Get Laid Off

As you complete the next steps you’ll be able to update your income and expense projection as needed with any new information.

Step #3) Health Insurance Options When You Get Laid Off

The next thing to do if you’ve been laid off is assess the updates to your health insurance. You’ll have the option to continue your employer provided coverage through COBRA. It will cost more after your layoff but may be your most direct option. Other choices include:

  • Spousal coverage
  • Private Insurance through the Marketplace
  • Medical Cost Sharing Plans

Be sure to update your income and expense projection with any cost changes. You can use our checklist to help you as you are reviewing your policy options.

A Checklist for Reviewing Health Insurance Options When You've Been Laid Off
Click Here to Download Our Insurance Review Checklist
Step #4) Equity Compensation When You’re Laid Off

One of the most common questions we get is, “what happens to my equity compensation if I get laid off”. It’s important to note that some layoff scenarios will come with accelerated vesting schedules or a limited window for exercising options. These are time sensitive issues to plan around so don’t put it off and get assistance as necessary. How your equity will be treated depends on your situation and the type of equity you have:

  • Stock Options may be forfeited or subject to accelerated vesting. Review your severance agreement
  • Equity from vested RSUs will always be yours, unvested RSUs may be forfeited or subject to accelerated vesting under certain terms
  • Money contributed to your ESPP but not used will be returned to you, share’s you’ve already purchased are yours to keep (subject to taxes if sold)
Step #5) Tax Planning If You’ve Been Laid Off

Each change to your income has potential tax benefits. The loss of a job would lower your income for the year and associated taxes while something like the exercise of options would likely raise it.

Changing jobs mid year may bring updates to withholdings, benefits, or things like the Premium Tax Credit for health insurance through the marketplace.

The most important note is to include these expense adjustments in your income and expense projection so you feel confident in your ability to execute your plan.

Step #6) 4 Tips for Navigating a Layoff as a Couple

  • Communicate openly: If you're part of a couple, communicate openly about your financial situation and any decisions that need to be made. Work together to create a budget and plan for the future.

  • Leverage each other's strengths: Use this time to support each other and leverage each other's strengths. One partner may excel at job searching, while the other may be more adept at budgeting and financial planning.
  • Create a Map For the Year - Project your income, any salaries, living expenses, tax bills, and savings goals for the year. The end result should look like some version of this.

Review Your Projection Regularly - The Income and Expense Projection mentioned in Step #2 above is the best tool I’ve found to lend peace of mind to times where income is uneven and things are in flux. This only becomes more true as a couple going through the process together. Set a monthly review for your finances and progress so you stay on the same page

Being laid off can be a challenging experience, but with careful planning and proactive steps, you can navigate this transition successfully. By managing your cash flow, maximizing employee benefits, addressing equity compensation, tax planning, and working together as part of a couple, you can lower the stress of the experience and work toward a successful transition.

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