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How to Budget After a Layoff: Your Financial Survival Guide

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Google “layoffs 2024” and you'll see that the number of workers laid off is already in the thousands—and we’re not even halfway through the year. From Google itself to Walmart, Dell, and Cisco, both well-known industry giants and smaller companies of all sizes have been busy restructuring their teams. This scenario leaves workers with a difficult mission: Budgeting their money while searching for a job in this economy.

When you're hit with a layoff, money often becomes an immediate concern. After all, the bills don't go away just because you're out of a job. While it's important to accept that certain things are simply beyond your control, there are steps you can take to feel more secure. Creating a plan to manage expenses until you find a new source of income is one of them.

A budget plan will give you a better sense of your finances, making it easier to cut back on discretionary expenses so you can prioritize the essentials. You should also be wise about managing your savings and any debts you may have. Here's how to budget after a layoff—according to a finance expert.

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What to do when you've been laid off? Key financial tips

Being laid off often takes workers by surprise—no wonder there's a wave of lay off anxiety out there. For those going through this for the first time, it can feel disorienting and tough to figure out what to do next, especially when it comes to your finances. Here are two essential actions to take after a layoff:

  • Apply for unemployment benefits: You might also see this described as unemployment insurance, and In the U.S., each state has its own specific program. To apply for benefits, you need to contact your state's program either in person, by phone, or through their website. To file a claim, you must meet the general eligibility requirements set by the Department of Labor, as well as any additional requirements specific to your state.
  • Find health insurance plan options: Unemployed people are also eligible for certain healthcare benefits. For instance, you can enroll in the Affordable Care Act. Medicare or Medicaid are also available options, however, you should meet their age and income criteria to qualify.

How to budget after a layoff in 5 steps

Job loss is one of the greatest fears for self-sufficient adults. But by learning how to make a budget, you can handle this financial challenge smoothly. Here are five tips and expert advice for you:

1. Estimate your new cash flow

When you lose your job, you’ll need to rely on unemployment benefits and/or your savings, until you get another job. Take the time to estimate how much money you'll have coming in and for how long. This will give you a clearer picture of your financial situation and help you determine how long you can support yourself while job hunting.

2. Evaluate current expenses

Next, sit down and evaluate how much money you're currently spending. Calculate everything, from rent and utilities to gym memberships and streaming subscriptions. To make it easier to visualize, categorize these expenses as essential and non-essential or fixed expenses (i.e rent) and variable expenses (i.e electricity).

3. Make a “bare bones” budget

“If you are relying on unemployment, or drawing down an emergency fund, you’ll want to use a bare bones budget,” says Amy Coroso, a certified financial education instructor (CFEI) and author of Planning Your Retirement Life.

A “bare bones” budget focuses on meeting your basic needs. “In other words, the essentials: food, rent or mortgage, utilities, transportation,” Coroso says. This means you'll need to cut out every non-essential expense, such as streaming services, monthly subscriptions, and takeout. “Ask yourself, what do I actually need to live?”

The amount you need to cover the bills that keep you alive and fed with a roof over your head is now your new budget. Since some of these expenses are variable—like electricity, gas, and water—look at how much you spent over the past three to six months to estimate your expenses for the upcoming months. (You might also be able to switch certain utilities to a fixed monthly estimate, so that you know what to expect.)

4. Prioritize renegotiating debts

If you have debts to pay, renegotiating with your creditors should be one of your top priorities, Coroso says. “Contact your creditors and explain your situation—you can request lower interest rates and reduced monthly payments. You can also request a debt settlement plan.”

“Just remember that paying less than the full amount you owe will show on your credit report,” she says. This could affect your credit score and make it harder to get credit in the future.

Since you're going to speak with a debt collector, Coroso advises being prepared with a set amount you can afford to pay based on your current budget. “Get organized and have a plan from the start,” she says. “Write everything down—date, time, outcome, who you are talking to. Remain calm, ask for everything in writing, and don't make any payments until you have a written agreement.”

5. Don't rely on your retirement savings

It can be tempting to dip into your retirement accounts for some extra cash, but using that money after a layoff isn't financially wise. “There are taxes and fees associated with withdrawing from a Roth IRA or 401(k), so you’ll lose money by doing this,” Coroso says. “You may also postpone your retirement date if you are unable to reimburse your account.”

According to her, the only potential option here is withdrawing your contributions—not your earnings—from a Roth IRA “without penalty before age 59 and a half.” This option is available for those who have held the account for at least five years.

Even so, there are downsides. “You cannot repay the money you withdraw from a Roth IRA,” Coroso says. So you’ll miss out on the tax-free earnings that would have accumulated. “Early withdrawal from a retirement account should be considered the last possible option.”

How to financially survive a layoff Q&A

Still need help figuring out your financial situation after being laid off? Check out the answers for these frequently asked questions about money and unemployment—they might clarify exactly what you want to know:

How much money should you have saved if you lose your job?

Most experts recommend saving 20% of your income to build an emergency fund. You should save enough money to cover at least six months of essential expenses, such as rent, utilities, and transportation. For example, if your monthly bills total $1,500, you should ideally have $9,000 saved in case of unemployment.

What to do when you've been laid off with no savings?

If you don't have savings, you should rapidly find some source of income. “Immediately file for unemployment so there is some income coming in,” Coroso says. The finance expert also recommends trying for a part-time job or side hustle. (Here are three steps you need to take to actually start a side hustle.)

Get creative, she suggests. “You can look for day jobs like cleaning or putting furniture together. Is there anything in your home of value that you can sell? Think tag sale or consignment items. Do you love animals? Advertise as a dog walker or pet sitter,” she says.

If you're out of ideas, check out these 18 ways to make money online. “Think outside the box. You may even find a new career that you hadn't considered,” Coroso says.

How to save money when you are laid off?

When you are unemployed, getting by is what matters most. To save money, it's a good idea to cut unnecessary expenses and anything that's a luxury. You should also avoid using a credit card or taking on any debt you can't afford.

“Streaming services and drinks with your friends are not essential right now,” Coroso says. That doesn't mean you need to eat ramen noodles every night, but be mindful of your expenses.

Take advantage of discounts and coupons to save on groceries. If possible, switch to a less expensive phone and internet plan. You'll be surprised by how these small actions can make a big difference by the end of the month. Remember, this is a temporary change, and soon enough you'll be newly employed and able to return to your usual lifestyle.