Financial Planning After Job Loss

If offered severance, review the full agreement before signing. Standard severance is 1-2 weeks of pay per year of service. Clarify whether unused PTO is paid out (required by law in some states like California). Ask about the timeline for your final paycheck, commission payments owed, and vested stock options or RSUs. You typically have 21 days to review a severance agreement (40 days if you are over 40).

Add up all liquid assets: checking account balances, savings accounts, money market funds, and any pending income (final paycheck, severance, PTO payout). This is your financial runway. Divide by your monthly essential expenses to see how many months you can sustain. If you have 15,000 USD in liquid assets and essential expenses of 3,000 USD per month, you have a 5-month runway.

Under COBRA, you can continue your employer's health plan for 18 months but you pay the full premium (employer and employee portions) plus a 2% admin fee. COBRA premiums average 650 USD per month for individuals and 1,850 USD for families. An ACA marketplace plan may be cheaper. Job loss triggers a Special Enrollment Period (60 days to enroll). Compare COBRA costs with marketplace options at healthcare.gov before deciding.

File with your state's unemployment office (online in most states) as soon as possible. Benefits are not retroactive to your job loss date in many states, only to your filing date. Weekly benefit amounts vary by state (118-823 USD per week depending on the state and your prior earnings). Most states require you to have earned a minimum amount in the prior 12-18 months. Processing takes 2-4 weeks for the first payment.

Most states require you to actively search for work (typically 3-5 job applications per week), be available and willing to work, and report any income earned during the benefit period. Keep detailed records of every job application (company, date, position, method). States conduct random audits. Benefits typically last 26 weeks (some states offer less). Report all freelance or gig income to avoid penalties.

Depending on your income and household size, you may qualify for SNAP (food assistance, up to 291 USD per month for individuals), Medicaid (free health coverage for low-income individuals), LIHEAP (utility bill assistance), and local food banks. These programs exist for situations exactly like this. Apply through your state's benefits portal or call 211 for local resource referrals.

Essential expenses are housing, food, utilities, health insurance, transportation to job search, and minimum debt payments. Non-essential expenses include dining out, subscriptions, gym memberships, and shopping. Cut all non-essential spending immediately. The goal is to extend your financial runway as far as possible. Most people can reduce monthly spending by 30-40% when they cut discretionary categories.

Credit card companies offer hardship programs that lower interest rates (to 0-9%) and minimum payments for 6-12 months. Student loan servicers offer forbearance or deferment. Mortgage companies offer forbearance allowing delayed payments (added to the end of the loan). Call each lender proactively. Explain your situation. Most prefer to work with you rather than deal with missed payments and collections.

Review bank and credit card statements for recurring charges. Streaming services (30-60 USD per month combined), gym memberships (30-80 USD), meal kits (60-100 USD), and app subscriptions add up quickly. Most services allow you to pause rather than cancel, preserving your account history. Even saving 150 USD per month extends your runway by nearly 2 months over a year.

Call your auto insurance, phone carrier, and internet provider. Ask about lower-tier plans, loyalty discounts, or hardship rates. Switching car insurance can save 200-500 USD per year. Downgrading your phone plan from unlimited to a lower data tier saves 20-40 USD per month. Many internet providers offer reduced-rate plans for customers experiencing financial hardship.

Pay essential debts first: mortgage/rent (keeps your housing), car payment (if needed for job search), and utilities. Pay minimum payments on all debts to avoid default. If you must choose between debts, prioritize secured debts (mortgage, car) because the lender can take the collateral. Credit card and medical debt are unsecured and have more flexible resolution options.

Early 401(k) or IRA withdrawals before age 59.5 trigger a 10% penalty plus income taxes (total cost: 25-40% of the amount withdrawn). A 10,000 USD withdrawal may only net you 6,000-7,500 USD. Additionally, you lose decades of compound growth. Exhaust all other options first: emergency fund, unemployment benefits, hardship programs, and expense cuts. Retirement accounts should be the absolute last resort.

Do not open new credit cards, take personal loans, or borrow from family unless there is a clear repayment plan. Adding debt during a period of no income creates a compounding problem. If you absolutely must borrow, use a 0% APR introductory credit card offer (15-21 months interest-free) rather than a personal loan or cash advance, and have a plan to pay it off once employed.

Create a simple spreadsheet showing weekly income (unemployment, severance, side income) and weekly essential expenses. Identify the week when your cash reserves run out under current spending. This is your deadline. Knowing exactly when you run out of money helps you make rational decisions about how aggressively to cut expenses and how urgently to pursue income opportunities.

Gig work (DoorDash, Instacart, Uber) can generate 500-1,500 USD per week. Freelancing in your professional field often pays more. Temp agencies place workers within 1-2 weeks. Part-time retail and food service jobs hire quickly. Any income extends your runway and reduces financial anxiety. Report all income to your unemployment office to avoid benefit overpayment penalties.

Each week, review your cash position, spending for the prior week, upcoming bills, and progress on job applications. Adjust your spending plan based on how interviews are progressing. If your runway is getting short, escalate expense cuts or temporary income efforts. Consistent weekly reviews prevent the financial situation from deteriorating unnoticed.