What You Should Do When You Lose Your Job

It is unfortunate, but sometimes you unexpectedly find yourself out of a job and scrambling for new employment.

The US economy is teetering on a recession, which more often than not results in loss of employment.

During the recession of the COVID-19 pandemic, unemployment peaked at 14.8%.

That recession was brief by any standards and unemployment quickly fell back to normal levels with 12 months.

The current or coming recession, depending on how you look at it, figures to be longer. Inflation is at levels not seen since the 80s, interest rates are also rapidly increasing, and businesses are being squeezed on both the supply and demand side.

Many companies are already closing their doors. Here in Pittsburgh, Argo AI lost its backing from Ford and Volkswagen, leading to 2000 lost jobs.

So, what can you do if this happens to you?

While You Are Working

More than ever, it is important that you have a proper emergency fund.

An emergency fund is 3-6 months expenses set aside for emergencies.

Having this in place at all times will help you from racking up debt if you lose your job.

It buys you time to find another job and allows you money to live off of in the meantime.

Households with 2 earners should save at minimum 3 months expenses. Households with 1 earner need a minimum of 6.

If You Find Yourself Out of a Job

There are 5 simple steps you need to take if you find yourself out of work.

• Understand Your Severance
• Know Your Burn Rate
• Cut Unnecessary Expenses
• Start Your Search
• Meet With Your Advisor

Understand Your Severance

If you are let go unexpectedly, you may receive a severance package from your former employer.

Understanding this is key to your success.

This may provide you with temporary income while you search for your job.

It also may provide you with health insurance coverage.

I have also seen packages help with recruiting services for a new job. It may offer resume reviews and interview coaching to help you land your next offer.

Fully understanding all your benefits will help you make your assets last longer and provide you with a safety net while you are unemployed.

Know Your Burn Rate

Your burn rate is how quickly you spend your cash.

Add up all of your monthly expenses over the last 3 months before losing your job. Divide that number by 3 and you will have a good baseline as to how much you spend on a monthly basis.

Let’s say your burn rate is $6000 a month. And let’s assume you have $30,000 saved.

Divide the $30,000 by the $6,000 and you will find how many months until you run out of money. In this case it is 5 months. Which should be ample time to find a new job and replenish that money.

Cut Unnecessary Expenses

Another easy thing to do while calculating your burn rate is finding expenses you can cut.

You have a gym membership you use once or twice a month? Get rid of it and start working out outside.

You have a few streaming services – cut one you do not use as much.

You only go to high end grocery stores – try Aldi’s or other discount grocers.

This will allow you to spend less while you are looking for a job. It will also lower your burn rate and help your money last a little longer.

Start Your Search

You may feel despondent given your newfound unemployment. This is normal.

But you need to start your job search immediately. Especially if you were part of a mass layoff.

Think about it.

Your company just let go of hundreds or thousands of people who likely have a similar skill set to you. They will be your competition in your job search.

Take a day to absorb the blow but then get back to it. Rewrite your resume. Hire a career coach. See what resources your severance package offers.

But get back out into the recruiting environment sooner rather than later.

Also try to tap into your connections. Update your LinkedIn to let people know you are looking for a job. See what friends and family have available at their companies.

Reach out to old coworkers and mentors to see if they can put in a good word for you.

Referrals go a lot further than just blindly throwing you application into an online portal. Try this avenue first.

Meet With (or Hire) Your Financial Advisor

After about a week or so you will likely have a few leads on jobs. You may even have meetings set up.

Given that you have some more time in your schedule you should have a financial check-up.

This will have a longer-term view. While you are certainly worried about your near-term financial health allow a professional to worry about your long term.

They can help you roll over your 401(k) from your previous employer. Make sure you are properly insured. Help you with crafting your budget. Among many other things.

They also tend to serve a demographic of clients that tend to be wealthier. There is a chance that they may be able to reach out to a client in the same line of work to help you with your job search.

Allowing an advisor to help with some of these areas will allow you to focus on the more pressing need – you career.

It is also a good time to check in and see how this brief lapse of employment may affect your long-term plan.

If you do not have an advisor already. Go find one! You have time to interview a few and pick one that you like best. They will help provide clarity in a time that seems uncertain.

Putting It All Together

Losing a job is far from the end of the world. Following these 5 steps above will help you to make this transition time easier.

Use this time to reflect and be productive. What happened was out of your control, and you can use it as an opportunity to sure up your financial future.

What recommendations do you have for someone who lost their job?