You got canned

A practical guide to layoffs and what comes next for you.

Welcome back to the seventh edition of This is the Top. We’ve just crossed 5,000 subscriptions, and I am freaking out! I want to give a big welcome to our new subscribers and a massive thanks to all our readers. You guys rock!

This month, nearly 60,000 employees lost their jobs in sweeping corporate layoffs, according to Forbes. In the tech sector alone, 210 companies including huge names like Google, Microsoft, Salesforce, Meta, and Amazon, caught headlines for slicing and dicing their payrolls due to “recession fears.” Clearly, layoffs are on everyone’s minds. Just last week, I joined my friend Josh Brown on The Compound and Friends, where we touched on how and when layoffs might spread beyond technology and into other areas of the workforce.

Losing your job sucks. When the income faucet turns off, things get weird real quick. The stress and pressure mounts and you’re easily at risk of making short-term mistakes that impact your long-term financial landscape. But all is not lost (just your job). I help people navigate these murky waters all the time. Let’s look at what you can do when you show up to the office and your swipe card stops working. 

Don't Panic!

When you’re part of a mass layoff, just know, it’s probably not your fault. You’re not responsible for shifts in global macroeconomic conditions and boardroom decisions that respond to them. There’s no upside to blaming yourself for things that are outside of your control. Give yourself a minute to breathe or longer if you were blindsided and need it to regain focus for your job search.   

Evaluate Your Resources!

Figure out what you have to work with. Did you receive severance? How many weeks’ pay will it provide? This is obviously an important starting point, because it will help you identify how long of a runway you have for your job search.

What about your other incentives? If you were granted stock options, for example, most companies will give you 90 days from termination to exercise what’s vested. If you’re departing a publicly traded company, performing a cashless exercise can generate additional liquidity assuming the options are worth something. Otherwise, exercising options uses up your cash, which is likely the opposite of what you need after losing your job. It’s a good idea to speak with a tax advisor about possible tax consequences associated with exercising options. The last thing you need is a surprise tax bill waiting for you down the road.

Also, what does your cash reserve look like? Never heard of one? A cash reserve is generally defined as having three-to-six months of your living expenses in cash. I personally lean more towards having six-to-nine months of a cash cushion, which will give you even more confidence. Obviously, you’d want to work on your reserve before losing your job, but now would be a good time to save even more. Temporarily cutting expenses or reducing contributions to retirement plans can accelerate how much you save in cash.

Level-Set on Health Insurance!

Is your former employer extending your health benefits for an additional period of time? Most don’t. Isn’t that nice?

The first thing you want to do is check if your spouse or domestic partner has healthcare coverage through their employer. If they do, your termination is considered a qualifying life event (QLE). This should allow you to enroll in their employer’s plan. It’s likely going to be the most affordable and easiest option for continuing healthcare coverage. Sorry, singles.

Otherwise, this is where COBRA comes in. The Consolidated Omnibus Budget Reconciliation Act is a federal program that allows eligible employees and their dependents continued access to coverage under a prior employer’s health insurance benefits when you lose your job. If you qualify, you are usually entitled to 18 months of access to continuous coverage. BUT, there’s a catch: you’re responsible for the premium. All of it. Many employers subsidize a large portion of their employees’ health insurance premiums with the rest coming out of your paycheck pre-tax, so when you see that full premium for the first time, it might be shocking. 

This is why COBRA is a great bridge but not necessarily a long-term solution for your healthcare benefits. Yet, it’s one of the most important things to square away and will play into the rest of what you’re about to sort out. 

Understand (or Revisit) Your Cash Flow!

Knowing how much money you spend in a month will tell you how much time your resources actually give you to look for a new job. Period. You don’t know what you “can afford” or “can’t afford” until you know what your lifestyle costs. Pull six months to a year’s worth of expenses (i.e. credit card and bank account statements) and calculate how much, on average, you spend each month. Not only will this allow you figure out how much time you have before cash runs out, but it will help you understand which expenses can be cut, therefore maximizing what you have.

Don’t Touch Your Investments!

Do not touch your long-term investments unless you absolutely have to. I repeat: NO!  Not only can there taxes and penalties associated with taking early distributions (i.e. retirement accounts), but most long-term strategies rely on leaving things right where they are. In many instances, it could actually make sense to borrow against your investments before being forced to sell them. Interrupting the effects of compounding, or having to sell when prices are low, is one of the single worst things you can do with your money. Be sure you’ve actually thought through all your options before liquidating long-term assets or retirement funds.

Check Your Gut!

Use this moment to make some lemonade in your life. A forced pause in the inertia of your career gives you a second to stop, think, and take a look around. Were you happy at your job—are you happy in general? This could be a chance to evaluate changes you wouldn’t have considered if you were still employed. Maybe you love to ski and wish you lived closer to the mountains. Maybe you never thought you’d have a chance to move your family back to your hometown, but now you do. Maybe you don’t like being a manager and miss being in the action. These aren’t just existential questions. They can actually help you cast a wider net in your job search or completely change the focus onto something that will make you much more fulfilled and successful in the long-term. 

Maybe this makes me a tad crunchy, but I generally believe that everything happens for a reason. Don’t take these moments for granted. 

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