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What Financial Issues Should You Consider If You Lose Your Job? Thumbnail

What Financial Issues Should You Consider If You Lose Your Job?


WRITTEN BY: Karina Karazhbey


We know there have been a number of mass layoffs in 2022. Being that we work with many clients in the tech industry, my team has been in touch with a number of people who have been affected by some of the most recent layoffs.

For those of you going through it right now, we thought we'd share some additional context as you ponder your next career move.

First off, (and to state the obvious) there is a mountain of difference between getting “laid off” and “getting fired”. Being laid off is not a result of your personal performance in the firm, but rather structural company changes...that may result in you being in a better professional setting 6 months from now! So, take a moment to pause, reflect on your experience at the company, and what you may look for this time around when you are networking and searching for your next opportunity.

From a financial perspective, there are some main topics you may want to think about if you find yourself in this position.

First and foremost, once you’ve found out you are in fact getting laid off, know your rights at the company. Going through your employer agreement will help you understand what you will receive in case of a lay off. Usually, employers will hold an info session for those affected.

Here are some questions you’ll want to make sure are addressed:

  1. Regarding your health/life insurance through work… how much longer are you covered? Does the company offer things like COBRA to assist in your future health insurance coverage while you are looking for another job? (If your spouse is currently in open enrollment, it may make sense to join their plan especially if you see yourself taking a longer hiatus from work).
  2. Regarding paid time off… Do you have any unused vacation/sick days? Sometimes, the firm will pay you a lump sum for the unused days.
  3. Regarding your remaining income you’ll receive from the company… Discuss your severance package and ensure you have all the details of your payout.
  4. Regarding your equity… If you have equity in the company, get clarity on your vested vs. unvested RSU shares, your ESPP plan, or your ESOP plan. You also will have limited time to make a decision with your stock options. Most of the time you will have 90 days to exercise any vested (but not yet bought) stock options. You need to know if they Incentive Stock Options or NQ and the corresponding tax treatment for exercising (as well as how it will effect your cash flow.)
  5. You have options as to what to do with your employer 401k... You can roll it over to a new IRA (as a lot of our clients do as we will have more varied investment options than a typical 401k plan offers & doing so will allow you to diversify/separate these funds from your employer entirely), or you can wait to roll it into your new 401k at your next job, or leave it as is (we don't recommend this one!)

Once you have a bit more clarity on what your rights & benefits are through the firm, take a look at your current finances and consider the following:

Assess your emergency fund...

As you are looking for a job, you want to have an adequate emergency fund liquid and available. You want to build up a cash reserve of 3-6 months’ worth of living expenses.

Redo your budget...

Where are the areas you can cut back on? Now is the time to reduce miscellaneous/ unnecessary spending while cash flow is tighter. Did you have any bigger purchases on the horizon? If so, you may want to put a hold on these until you have stable income coming in. Don’t rush into buying a house, car, etc. while you don’t know what your future income will look like.

Consult with your financial advisor...

They know your overall picture and want to be involved in this process as you are figuring out next steps. They can assist you with digging through your former employer’s retirement plan, deciding what to do with your vested stock options, and help you make any changes to your overall investment strategy. And of course, if you don't have a financial planner...this sort of transition in your life is the perfect opportunity to build a meaningful & comprehensive roadmap for your future. Do not wait until you get your new job and life is moving a million miles a minute again!

As a friendly reminder we are always available to speak over a 15 minute Right Fit call if you feel you could use some help navigating your financial situation.

Together, we can determine if our Financial Life Plan® process is the right fit for you.

Some of our clients have found the following checklist helpful to understand what kind of questions they should be thinking about: "What Issues Should I Consider If I Lose My Job"

It is purely for informational purposes. Please feel free to pass along if you know someone who could use more resources at this time.