Navigating Your Finances After a Tech – or other – Layoff

My husband works for a major tech company, and recently we heard unsettling news—his employer is planning to lay off 15% of its workforce in the coming months. This so-called “corporate people movement” made us question what it could mean for our family’s finances if he ended up being part of it. In times like these, I find it helpful to take a step back and assess our financial situation as if I were advising a client. Having a solid financial plan in place brings peace of mind, and I want to share some strategies that can help others in similar situations. Even if your job feels secure, it’s worth planning ahead.

Here are some key strategies to help manage your finances.

1. Assess Your Financial Situation

Taking stock of your financial position is the first step toward making informed decisions:

• Severance Package: Carefully read the severance agreement to know what you’re entitled to, including any benefits like health insurance or retirement contributions. Some severance comes with a non-compete agreement that you should be aware of before signing.
• Emergency Fund: It’s ideal to have 3-6 months of living expenses saved. If you haven’t yet built that cushion, there are other options, such as accessing retirement accounts under certain conditions to avoid penalties based on age and situation.  You can learn more from the IRS site here.
• Create a Revised Budget: Revisiting your budget will help you prioritize essential expenses like housing, groceries, utilities, and healthcare. Cutting back on nonessential spending can give you more flexibility during this transition.
• Debt Management: Review your outstanding debts, including mortgages, credit cards, and loans. Prioritizing payments and potentially refinancing at a lower interest rate could ease financial pressure. If interest rates drop, it might be an opportunity to refinance your mortgage. Consolidating or transferring high-interest credit card balances can also reduce monthly payments.
• Investment Portfolio: Look at the liquidity of your assets and explore ways to maintain income during uncertain times. Some investment strategies allow you to live off dividends or interest without tapping into the principal.
• Company Stock Options: If you have stock options through your employer, pay attention to how a layoff could affect the vesting schedule. Selling at different time could have different tax implications, so it’s important to plan accordingly.  You can learn more from the IRS site here.

2. Explore Additional Income Streams

While looking for new work, exploring alternative income sources such as freelancing or consulting can help fill in the gaps. Renting out part of your home could be another option.

• Unemployment Benefits: Each state manages its own unemployment insurance program, and you will want to file in the state in which you worked if it’s different from your residence state. To qualify for benefits, many states require that you have earned a certain amount consistently for the last 12-24 months and that you are actively seeking new employment.

Find your state application here. Apply early as it may take the government more than three weeks to process your application.

3. Compare Health Insurance Options

Losing employer-sponsored health insurance can be daunting, but there are options. Comparing COBRA with marketplace plans can help you make a more informed choice.

Take the time to compare the costs and benefits of maintaining your existing health benefits with COBRA coverage versus enrolling in a health insurance plan provided by your state or the government here. A careful comparison will help you make an informed decision about whether to switch plans. Note you generally can’t use a Health Saving Account (HSA) to pay premiums.

4. Review Retirement Savings

If you lose your job, you’ll need to decide what to do with your retirement accounts. Rolling over a 401(k) to an IRA can offer more flexibility, access to financial planning advice and potentially lower fees, especially since custodial banks may charge fees to maintain a 401(k) after a grace period. With an IRA, you can access a wider range of investment options and personalized strategies.

5. Seek Professional Guidance

Navigating a layoff can feel overwhelming, but you don’t have to do it alone. Whether you’re working with an advisor or simply seeking professional input, it can be helpful to get advice tailored to your situation. A financial advisor can provide personalized strategies to help you through this time and prepare for the future. If you’re considering hiring one, check out our article, “5 Questions to Ask When Selecting an Advisor” to help you find the best fit.

Facing a “corporate people movement” or a potential job loss is stressful, but with a solid plan and the right guidance, you can maintain financial stability and peace of mind through the process.

All of Coldstream’s staff shall attain the required licenses and designations necessary for his/her position.  Certified Financial Planner Board of Standards Inc. owns the certification marks CFP^® and Certified Financial Planner^TM in the U.S.