Preparing For a Possible Job Layoff & How to Bounce Back Fast
- Job security comes and goes quickly in this shifting economy
- Having action plans before a possible layoff and after losing a job are keys to setting yourself up for success with your next career endeavor
- normal to go through difficult emotional times around a career transition, but executing certain financial steps can help ease the burden
Uncertainty and anxiety are common feelings when your job might be at risk. The good news is that it is a routine part of the business cycle, and many other people face the same situation through the ebbs and flows of the economy. There are also steps you can take today that can set you up for success no matter how your job situation plays out.
Coping with the Anxiety
First things first. Take care of yourself and your family – keeping your priorities in line ensures you make sound decisions. Mental health is more important than ever in today’s non-stop working environment. Taking time out to unplug while you are employed keeps you fresh for any challenges that might come your way.
Focusing on Your Finances
If you fear that layoffs could strike your company and that you might be affected, you must get your ducks in a row. Maximizing the value of all your benefits helps provide the biggest possible financial cushion. Here are some key action items to prep for a possible job loss.
- Review stock options that need to be exercised within 90 days of a layoff.
Tech industry workers are particularly at risk of losing valuable employee stock options if they don’t act quickly post-employment. You generally have up to three months, or 90 days, from the termination date to exercise vested incentive stock options (ISOs), but that period might be different depending on the company’s plan. Moreover, non-qualified stock options (NQSOs) may have a longer timeframe within which you can exercise.
- Should you exercise?
Step one is to figure out by what date you must exercise but then you must determine if you should. There is the chance that a firm going through large downsizing might also see its valuation plummet. That might result in your options having strike prices above the fair market value of the shares. Sitting down with an experienced financial planner well-versed in equity compensation is a prudent move. An effective strategy might be to perform a cashless exercise.
- Gather information from your HR portals.
Part of bouncing back after losing a job is knowing all the benefits you had with your former employer. This part of the process helps you prepare for negotiating your next job offer. First, taking screenshots of everything on your HR portal is a smart (and ethical) step. You will lose access to your benefits page upon termination. Next, knowing all the details on other equity compensation areas such as restricted stock units (RSUs), an employee stock purchase plan (ESPP), or even just the 401(k) plan’s vesting structure is important so you don’t miss out on key financial rewards. Finally, ask HR any questions about policies on which you are uncertain – you can even request copies of all the contracts and documents you signed when you were hired.
- Build an emergency fund.
Maintaining three to six months’ worth of living expenses in cash is common personal finance wisdom. You don’t always need a large sum of money sitting in a checking account, though. So long as you have a means of efficiently tapping resources at a low cost, then you are in decent shape to meet everyday financial obligations. Home equity lines of credit, lower-risk bond investments, unreimbursed HSA-eligible expenses, and even Roth IRA contributions are all possible liquidity sources. In general, you want to avoid tapping pre-tax retirement accounts since doing so might result in owing income tax and a 10% early distribution penalty on the withdrawals.
- Research your health insurance coverage options and negotiate.
Often the biggest driver of anxiety with a job loss is what to do about you and your family’s health insurance. After losing a job, it’s routine for firms to allow former workers to remain on the health plan for a set number of months. COBRA also mandates a continuation of health benefits (even if you quit) for up to 18 months, but that’s at your own expense. Asking your HR department for longer employer-paid coverage is sometimes worth it, particularly if you do not have a spouse’s plan to access. In general, always be sure to sit down with HR so that you get the best possible severance package.
Taking Care of Yourself
Should you lose your job, it’s all the more important to ensure your emotional well-being. A sudden layoff can feel like a piece of you just died – and that is not overstating it. We all get wrapped up in our work that it becomes part of our identity. It’s common for high-performing individuals to go through various stages of emotional turmoil from anger to resentment to fear and anxiety.
Your Best Asset is a Healthy You
This emotional roller coaster is why it’s so critical that you stay connected socially. Doing so has the added benefit of staying in the loop for new career opportunities. The last thing you want, personally and professionally, is to be isolated. Talk with friends and family and consider seeing a therapist – that helps many people cope with a job loss so they bounce back stronger than ever. Lastly, just getting outside and exercising provides so many mental benefits as well as obvious physical rewards.
Leveraging All Resources
The good news is that recessions and lousy employment markets are temporary. The economy eventually finds its footing. That’s when you must aggressively pursue the job you want. Research what fields fit your background and expertise. Sites like Indeed, LinkedIn, and ZipRecruiter are all effective resources when used the right way. Attending local professional group meetings and luncheons is another way to put yourself out there – you might even get the inside scoop on a job not yet made public.
The Bottom Line
Preparing for a layoff is not an enjoyable task. It is smart financial planning, though. While we all like to ponder the good life in retirement, facing the stressful realities of today is not only practical, but also necessary when the employment picture turns south. There are several steps you can take and goals you can set to prepare for a job loss to ensure you and your family are best positioned to weather the storm. You can then confidently take aim at your next bold career adventure.