Seven Best Practices for Professionals Facing a Layoff
The best practices outlined below begin with some urgent financial matters, progressing to longer-term planning issues for situating your layoff in the context of your personal financial planning goals.
While the items highlighted below focus on financial priorities, we understand that this can be a trying time on a personal level as well. We encourage you to take some time to heal, process, and seek out any support you may need. When you feel ready, proactively working through the list below can help address the uncertainty that is often the root cause of layoff-related stress.
Step One: Review Your Financial Situation
When facing a layoff, it is important to ensure your short-term financial foundations are secure before worrying about longer-term planning issues. We recommend beginning by:
- Assessing your available cash reserves to establish a baseline for budgeting and near-term financial strategy.
- Creating a new, temporary budget based on any secondary income sources, your available cash reserves, and critical month-to-month expenses.
- Creating a realistic extended budget to inform a timeline for how long savings can sustain your current living expenses.
- Reviewing investment strategies to ensure they are in alignment with your new financial situation. For example, you may wish to convert some portion of your portfolio to more liquid holdings for emergency expenses.
Step Two: File for Unemployment Benefits
Filing for unemployment benefits as soon as possible is a crucial step to help stabilize your income during this transition. Visit your state’s unemployment website to understand the eligibility requirements and complete your application. While unemployment benefits may not fully replace your previous income, they can provide a critical financial buffer while you plan your next steps.
Step Three: Review Severance Documentation
Once your financial fundamentals are in place, reviewing all important documentation from your former employer should be a top priority. Some key issues to evaluate include:
- Any monetary severance offered (including potential compensation for unused vacation days).
- Any language pertaining to the possibility of being rehired with the same employer. It is not uncommon for large employers undergoing a major restructuring to terminate an employee only to rehire them months later.
- Soliciting letters of recommendation from colleagues or managers while they are still easily accessible and you have a recent working relationship.
Finally, there are important legal considerations when facing a layoff. Understand your rights, and consider seeking out legal guidance when reviewing your severance package.
Step Four: Update Your LinkedIn Profile
While sharing news of your layoff may be an emotional obstacle, updating LinkedIn and/or other professional profiles as soon as possible is an effective way to accelerate the next steps in your career transition. Your network may have a valuable role to play in finding your next opportunity, and recruiters use LinkedIn as a key source of information.
If you feel up to it, crafting a short post may help communicate the circumstances of your layoff and your intentions for the next steps in your career. However, simply updating your current employment status and/or utilizing the Open to Work feature may be sufficient for signaling your availability to recruiters and potential employers.
Step Five: Review Medical and Insurance Benefits
One of the most immediate concerns after a layoff is maintaining health coverage. Review your current medical benefits and consider whether to extend your coverage through COBRA or explore options on the healthcare exchange. Additionally, review any other insurance policies, such as life, disability, and umbrella insurance, to ensure you remain adequately protected during this transition.
Step Six: Assess Equity Compensation and Retirement Accounts
In general, you will have up to three months to exercise any vested stock options with your former employer. Working with a financial planning professional may be helpful for determining the optimal next steps for these investments. If you need help with fundamental equity compensation terms and concepts, our guide is a great place to start.
If your previous employer offered a 401(k) plan, evaluate whether it is in your best interest to rollover to an IRA. Doing so can offer greater control over your investments, potentially lower fees, and simplified long-term planning and administration.
Step Seven: Consider the Next Steps in Your Career
While unexpected, a layoff can be a useful opportunity for assessing your career in the context of your personal financial plans. How will this change affect the viability and timing of your long-term goals?
For some individuals, a layoff is simply a brief period of career transition. Now is the time to begin proactively exploring new opportunities until you find the right fit for your own priorities. If you receive multiple offers, a trusted advisor may prove helpful for weighing their benefits and assessing their impact on your financial plans.
Other professionals may find that they are already well-positioned to accomplish their most important financial goal: retirement. In these cases, your advisor can help you navigate this transition and create a plan to benefit you for the long term.
Work with a Financial Advisor to Map the Best Path Forward
Whether you are navigating an unexpected career change, or simply seeking to create a more detailed financial plan, a knowledgeable financial advisor can play a valuable role in helping to align your career decisions with your personal path to fulfillment.
If you need help identifying the best path forward in your financial life, we invite you to reach out to schedule a discussion with a Wealthstream Advisor.
